EUR/USD could not break below 200-day moving average support mentioned. The currency pair went as low as 1.2661 but jumped up to 1.2802 and after finding resistance below 22-day EMA, dropped by 112 pip before closing for the week at 1.2742. The movement during the later part of the week has been non-directional.
EUR/USD and 200-day Moving Average Support:
Though our overall outlook for EUR/USD stays bearish but as we had mentioned during last week that a break of 200-day moving average is critical. Please check this Forex blog post about this. Considering this we stay neutral initially to expect some sideway moves or even some upward correction before another fall takes place. The weekly MACD is indicating bearish sentiments.
On the upside if a break over the recent 1.2802 takes place then some resistance is expected near 1.2835/1.2840. This zone represents the resistance of current 55-day EMA as well as the resistance of Kijun line of daily Ichimoku cloud (please check the technical outlook page). Even if EUR/USD manages a break over 1.2840 a very strong resistance is expected in the range of 1.2875/1.2885. This resistance is derived from the previous price actions and previous resistances and supports during October 24th and November 7th.
If the above resistances hold and a break of recent 1.2661 takes place then again some support is expected near 1.2640. Please note that the 200-day moving average line has been slopping down and is now near 1.2650. Not only that but the psychological support of approaching 1.2500 level will also start coming over 1.2610. Below 1.2640 the pair may try to target 1.2605/1.2610 which will represent 50% retracement of the upward move during July 24th and September 17th. Anny sustained break below 1.2605 should bring further deeper moves towards 1.2520 but frequent supports should be coming over 1.2560 and 1.2540 because of the psychological support of 1.2500.
EUR/USD: Next Target 50% Retracement?
However, on the upside, if there is any decisive break over 1.2885 then our above outlook will neutralize for the near-term and in that case further upward gains towards the psychological resistance of 1.3000 can be expected.
As we have been mentioning, our overall the longer term outlook is not bullish. This is because of the overall debt crisis situation and bearish growth prospects of Euro zone and also technically. Though the currency pair had broken over the mid-term parallel channel, the recent upward gains have not completed the 38.2% Fibonacci retracement of the downward move during from the beginning of May, 2011 and July 24, 2012 and hence we have been considering the earlier upward move (before the current fall) just as a consolidation in the longer perspective
May 2011 to July 2012 Moves and Finonacci Retracements:
EUR/USD Price Action Channel: