EUR/USD Spooks Long Traders

03/25/2010 12:01 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; chart patterns in white; 50-period simple moving average in light blue.)

Price action on EUR/USD, a daily chart of which is shown, has displayed a strong bearishness in line with the overall prevailing downtrend, establishing a new ten-month low in the process and confirming a downtrend continuation.

After the key 1.3800 resistance was tested and respected several times last week, price broke down below a well-formed bearish rising wedge pattern. After that breakdown, continued bearish price action followed through to break down tentatively below the important 1.3400 support region as of Wednesday (March 24).

In line with the strong current downtrend that has been in place since the December high, a bearish bias continues to prevail.

A key support target to the downside resides around the 1.3100 price region. To the upside, the broken 1.3400 price region should now serve as near-term resistance within the context of the strong downtrend.

By James Chen, chief technical strategist,

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