EUR/USD Breaks Support on Daily Chart

07/07/2009 9:55 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

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

Price action on EUR/USD, a daily chart of which is shown, has tentatively broken down below an uptrend support line extending from the late-April lows. This breakdown is significant, but does not yet place the pair in immediate jeopardy of breaking its overall uptrend.

This would occur only on a strong breakdown below the 1.3750 price region. Currently, the short-term bearishness in the pair is apparent, but price is still entrenched within a prolonged sideways consolidation, despite the trend line breakdown.

Further bearish follow through on this trend line break should target key support in the noted 1.3750 support/resistance region. To the upside, the 1.4335 resistance is still the key price level to watch, as a significant breakout above that level would confirm a clear uptrend continuation.

By James Chen, chief technical strategist, FX Solutions

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