June 12, 2014 – EUR/USD (daily chart) has dropped once again to revisit its four-month low at the major 1.3500 support level that was hit only one week ago. Within this past week, the currency pair had risen off 1.3500 in an attempt to recapture the 1.3700 handle and the 200-day moving average, but fell short after reaching a high of 1.3676. Now that price action has fallen back down on Thursday to retest 1.3500 once again, the prospects for EUR/USD appear increasingly bearish. Lending further to this bearish bias is the fact that the pair is trading well beneath its 200-day moving average, which has not been the case for nine months, since September 2013.
Having just retested major support, EUR/USD is once again at a critical technical juncture. The 1.3500 support level also happens to be around the 38.2% Fibonacci retracement of the prior 10-month uptrend. At the moment, this could be considered simply a pullback within a bullish trend after reaching a two-and-a-half-year high of 1.3993 in early May. A strong break below 1.3500 support, however, could turn the current pullback into a potential bearish reversal. In this event, a near-term downside support target resides around the 1.3300 level, last hit in November 2013. With any major rebound and recovery from the current support, the key bullish objective 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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