May 13, 2014 – EUR/USD (daily chart) has dropped sharply from the 1.4000 price area down to key support around the 1.3700 level. Last week saw the currency pair hit a new 2 ½ year high of 1.3993, just short of its 1.4000 upside target, before dropping sharply and following through on its short-term downside momentum. That sharp drop broke down below the 50-day moving average, suggesting a pullback and temporary loss of upside momentum, but has not yet breached the crucial 200-day moving average to the downside. The 1.3700 price region, around where price action is currently trading, represents a major support/resistance area where the currency pair last pulled back in March and April.
Currently lodged between its two key moving averages, EUR/USD is at a critical juncture. Any breakdown of the noted 1.3700 support level could prompt a downside breach of the 200-day moving average, beneath which the pair has not traded since September of 2013. In the event of this breach, further downside support resides around the 1.3500 level. If current support is respected with a price bounce, the major upside target remains at the noted 1.4000 level for a potential uptrend resumption.
James Chen, CMT
Chief Technical Strategist
City Index Group
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