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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 four-hour chart of which is shown, is currently in consolidation near the bottom of a parallel uptrend channel that has been in place since early June. This parallel uptrend channel exists within the context of a much larger parallel uptrend channel that has been in place almost since the beginning of the year.
In the current smaller channel, two dynamic support/resistance areas are of key significance. First, in the event of a substantial breakdown below the bottom of the smaller channel, the immediate further downside support target resides around the bottom of the larger channel. Second, a strong breakout above the bearish countertrend resistance line within the context of the smaller channel could target further major resistance at or near the top of the smaller channel.
By James Chen, chief technical strategist, FX Solutions
