May 22, 2014 – EUR/USD (daily chart) has continued to fall from its new two-and-a-half year high of 1.3993 that was reached two weeks ago. On reaching that high, which was just slightly short of its 1.4000 upside target, the currency pair promptly plummeted below its 50-day moving average down to major support around the 1.3700 level. It then proceeded to consolidate around that level before being weighed down even further, this time below its key 200-day moving average. Previously, EUR/USD had not traded below this moving average for more than eight months, since September of 2013.
Currently, the breakdown below both the 1.3700 support level and the pivotal 200-day moving average has created a marked disruption of the bullish trend that has been in place for the past ten months, since the 1.2750-area low in July 2013. Further bearish momentum on this breakdown should target a major downside support objective around the 1.3500 level, which is also around a key 38.2% Fibonacci retracement. In the event of a rebound and recovery to the upside from that 1.3500 support level or higher, the major upside 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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