Forex Analysis: EUR/USD Dips to Five-Month Low



July 21, 2014 – EUR/USD (daily chart) dipped below the major 1.3500 support level on Friday to hit a five-month low at 1.3490 before rebounding slightly. The directional bias for the currency pair has remained strongly bearish since May, when a conspicuous breakdown below the 1.3700 level and the 200-day moving average occurred. This bearish bias was reinforced after the EUR/USD dropped to 1.3500 support in June, then rebounded back up to the 1.3700 level and the 200-day moving average in late June, but was unable to break the resistance there before falling back to the downside.

EUR/USD continues, at the moment, to show classic indications of a new bearish trend: from the sharp decline off May’s 1.3993 multi-year high, to the swift breakdown below key support levels, to the 38% Fibonacci retracement of the new bearish trend, to the atypical cross of the 50-day moving average below the 200-day. Having just dipped below key support at 1.3500, yet another bearish indicator, the currency pair could soon be poised to target its next major downside objective around the 1.3300 support level, last hit in November of 2013.

James Chen, CMT
Chief Technical Strategist
City Index Group

Forex trading involves a substantial risk of loss and is not suitable for all investors. This information is being provided only for general market commentary and does not constitute investment trading advice. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any financial instrument and should not be used as the basis for any investment decision.

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About Author

James Chen is Chief Technical Strategist for City Index Group. He is also a Chartered Market Technician. He is the author of the books: "Essentials of Foreign Exchange Trading" (John Wiley & Sons, 2009) and "Essentials of Technical Analysis for Financial Markets" (John Wiley & Sons, 2010). Mr. Chen writes currency analysis, leads forex trading seminars and has appeared in numerous major financial media outlets, including CNBC, Bloomberg TV, Forbes, Reuters, Dow Jones, and the Associated Press.

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