EUR/USD (daily chart) as of April 16, 2013 has rallied in early trading today, regaining the ground lost during yesterday’s decline. The past week has seen clear respect for resistance around the 38.2% Fibonacci retracement level of the two-month plunge beginning in early February above 1.3700 down to the double-bottom low around 1.2750 in late March and early April. After that double-bottoming pattern, price has climbed steadily in a net bullish correction for the past two weeks.
Today’s rally has so far climbed only slightly above the noted 38.2% Fibonacci retracement level, hitting strong resistance at 1.3150 and placing EUR/USD at a critical juncture. Clearly, a breakout above 1.3150 would extend the current bullish correction, with an objective towards further upside resistance around 1.3300. If the 1.3150 level and the 38.2% Fib level are respected with a turn to the downside, a subsequent breakdown below the key 1.3000 level could trigger a resumption of the bearish trend towards 1.2650 and below.
James Chen, CMT
Chief Technical Strategist
City Index Group
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