EUR/USD (daily chart) as of Tuesday (9/13/2011) has reached and respected key support in the important 1.3500 price region, a round number psychological level that has served well as previous support and resistance in the past. This support bounce occurred just a few pips below the 1.3500 level, and hints at a potential pullback in the dramatic bearishness that has characterized this pair for the month of September thus far. Prior to the current bounce, this month’s bearishness made a swift and strong breakdown last week below a confluence of support that included both the key 1.4000 psychological support level, the 200-period simple moving average, and an important uptrend support line extending from the June 2010 low that represented a 15-month uptrend for the pair. On a bullish continuation of the current bounce, the key upside resistance target continues to reside around the important 1.4000 level. To the downside, on a subsequent breakdown below the 1.3500 level, which would confirm a downside trend continuation, an immediate downside support target resides around the 1.3300 price region.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education