EUR/USD Fails at Key Resistance

03/09/2011 1:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

The pair has trended sharply higher all year, but the recent failure to close above key resistance means 1.4000 is still the upside level for traders to watch.

By James Chen

Price action on EUR/USD (a daily chart of which is shown) as of Tuesday (Mar. 8) has retreated substantially after slightly surpassing, but failing to make a daily close above, the key 1.4000 resistance and psychological level.

chart
Click to Enlarge

(Price on first pane, Slow Stochastics on second 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.)

After making a high at 1.4034 early Monday, but ending up the day closing well below 1.4000, price dropped significantly early Tuesday to again approach the prior downside high of 1.3860 hit in early February.

Currently, price is still entrenched within a steep uptrend extending back to the early-January low of 1.2872. In the event of a significant breakdown below the uptrend support line, price could once again begin targeting important downside support in the 1.3500 price region.

The 1.4000 price region continues to serve as the key upside resistance level to watch for any subsequent breakout and continuation of the entrenched uptrend.

By James Chen, chief technical strategist, FXSolutions.com

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