EUR/USD Breaks Key Resistance Level

03/17/2009 9:36 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; Fibonacci retracements in grey; 50-period simple moving average in light blue.)

Price action on EUR/USD, a daily chart of which is shown above, has just reached and tentatively poked its head above key resistance just above the 1.3 mark. This price region represents a strong psychological level, a prior support/resistance region, as well as a significant 23.6% retracement percentage of the latest bearish trend.

Currently, 1.3 is a critical juncture because the manner in which price interacts with this level should help determine direction moving forward. A strong close and break above 1.3 with bullish follow-through on the daily chart has the potential to indicate a confirmed 1.2500 region double-bottom formation (as the peak between the two bottoms is just below 1.3000).

In this case, a major resistance target to the upside resides around 1.3300. Any clear subsequent retreat from around 1.3 would be a significantly bearish sign that should push price down to target a retest of 1.2500.

By James Chen, chief technical strategist, FX Solutions

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