January 6, 2013 – EUR/USD (daily chart) has begun 2014 with a defensive pullback to a key uptrend line extending back to the July 1.2750-area double bottom low. In the process, the pair has also broken down below the key 1.3700 level, descended slightly below the 50-day moving average, and established a new one-month low. This occurs after a two-year high at 1.3892 was hit shortly before the New Year, extending the bullish run that had been in place since July.
The current deep pullback from that high has tentatively stalled and turned up slightly at the noted trend line. Having thus far maintained support, EUR/USD is still within the bounds of a bullish trend. A re-break above resistance at 1.3700 would provide indication of a recovery of the current pullback, potentially placing the pair on track to target higher resistance objectives once again around 1.4000 and 1.4250. A breakdown below the trend line could signal a return to lower levels, with key support at 1.3300.
James Chen, CMT
Chief Technical Strategist
City Index Group
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