January 23, 2014 – EUR/USD (daily chart) has rebounded from key support around the important 1.3500 level after having pulled back from its two-year high of 1.3892 that was established near the end of 2013. That pullback broke down not only below the important 1.3700 level and 50-day moving average, but also below a key uptrend support line extending back to the July 1.2750-area double bottom low. After dipping below this uptrend line, the currency pair declined further to approach the noted 1.3500 support level earlier this week, before bouncing.
Thursday’s price action has seen the pair rebound sharply to make a tentative re-break above the noted trend line and 50-day average. Whether this bullish action continues on to recover the six-month uptrend remains to be seen. A re-break above 1.3700 resistance would lend some strength in that direction. Still well above its 200-day moving average and within the confines of a bullish trend, EUR/USD could well seek further upside to extend the entrenched uptrend. Key upside targets on a trend resumption above the noted two-year high reside around the 1.4000 psychological level and then the 1.4250 resistance level. To the downside, on any subsequent pullback, intermediate support continues to reside around the 1.3500 level.
James Chen, CMT
Chief Technical Strategist
City Index Group
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