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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, has made yet another bullish retracement within the context of the new overall downtrend. The current leg of this new downtrend extends from the January 13 high, and has formed a valid bearish resistance trend line.
Within the context of this downtrend resistance line, price has made several breakdowns of both short-term uptrend support lines and horizontal support levels. As might be expected, these breakdowns have continued the dominant downtrend with significant downside follow through. If the current leg of the prevailing downtrend is to continue, a key continuation trigger would be a breakdown below the current short-term uptrend support line.
A significant breakdown of this nature could target further downside support in the 1.3800 price region. To the upside, within the context of the current overall downtrend, in the event of any significant breakout above the current downtrend resistance line, the key 1.4000 psychological price region should serve as an immediate resistance area.
By James Chen, chief technical strategist, FXSolutions.com
