EUR/USD – 3 Key Support Levels Below the 2014-Low

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EUR/USD - 3 Key Support Levels Below the 2014-Low

After consolidating for a couple of sessions, the EUR/USD fell further during the 7/22 European session. Price is essentially testing the 2014-low of 1.3476. Here are a few things to consider from the daily chart:

EUR/USD Daily Chart 7/22)

eurusd daily chart 7/22

(click to enlarge)

1) The RSI shows maintenance of bearish momentum as it tagged 30 then held below 60.
2) The RSI is still above 30, so EUR/USD can fall further before dragging the RSI reading into what traders will consider oversold territory (below 30).
3) Price is trading below all of the 200-, 100-, 50-day simple moving averages in the daily chart.
4) Price has broken below a rising trendline connecting the lows of July 2012 (1.2041) and July 2013 (1.2755) . It appears that July 2014 is not following suit. (refer to the weekly chart below).
EUR/USD Weekly Chart 
eurusd weekly chart 7/22

(click to enlarge)

Here are 3 targets to consider for the bearish outlook below 1.3476, the current 2014-low:

1) 1.3425: This is where the 200-week SMA resides. The 200-week SMA is a long-term moving average that provided support in Oct. 2013. It is a key moving average for long-term traders. You can expect buyers here to challenge the bearish outlook.
– If price can move below 1.34, and thus clear the 200-week SMA, the bearish outlook should strengthen. To strengthen the case for a bearish outlook in the medium to long term, I want to also see the weekly RSI break below 40, which would show loss of momentum established throughout 2 years of bullish action.

2) 1.3295-1.33 Support Pivot: A break below the 2014-low also opens up the Nov. 2013 low at 1.3295-1.33. Being able to reach this point is already a strong bearish sign. By this point, the former 2014-low around 1.3476 should be considered a possible resistance if there is a pullback.

3) 1.3245-1.3250. 38.2% Retracement: If the 2014-low breaks, EUR/USD is likely in a bearish correction against a 2-year rally from 1.2042 to 1.3993. A conservative expectation for a bearish correction is 38.2% retracement, which is at 1.3248. Thus, If we EUR/USD breaks below the 2014-low, and gives us a couple more bearish signals to confirm the breakout, it is not an aggressive expectation for a retracement toward 1.3250.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.