Price action on EUR/USD (a daily chart of which is shown) as of Monday (Jan. 3, 2011) has been range bound within an approximate 500-pip trading range since the 1.2970 low was hit about a month ago.
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Chart note: Price on top pane, Slow Stochastics on bottom 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.
Resistance on this range resides around the 1.3500 price region, while support remains in the 1.3000 psychological support area, which includes the noted 1.2970 low.
Despite this range-bound activity and the most recent rise to approach resistance, EUR/USD continues to carry an overall bearish bias in line with the bearish trend that was initiated after the drop from 1.4280, which began in early November.
A clear breakdown below 1.2970 will have confirmed a continuation of the bearish trend. In this event, a key downside support target can be found around 1.2600, and then potentially further down on a longer-term basis around the key 1.2000 psychological level.
By James Chen, chief technical strategist, FX Solutions
