EUR/USD Stalling at Resistance

10/21/2009 12:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

Click to Enlarge
(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 just reached a new 14-month high, and has stalled around yet another resistance level (just under the 1.5000 price region) within the context of a strong continuing uptrend. This uptrend is framed by a clear parallel uptrend channel that has been firmly in place since the March lows.

The overall trend and directional bias continue to be bullish, although the short-term uptrend since the beginning of this month has been excessively steep. Therefore, a bearish correction may soon be in the making, with strong dynamic support residing around the bottom border of the parallel uptrend channel. Any strong breakout above 1.5000 would be a significant trend move that could potentially carry the momentum to target further key resistance around 1.5300, which represents the double-top trough that occurred in mid-2008.

The all-time high just above 1.6000 represents an important longer-term target if the current uptrend continues its course.

By James Chen, chief technical strategist, FX Solutions

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