(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; horizontal support/resistance lines in yellow; Fibonacci retracement levels in grey; 200-period simple moving average in light blue.)
5/05/2008 – EUR/USD – After failing to hold the all-time highs slightly above the key 1.6000 level, price on the EUR/USD daily chart, as shown, has plummeted for the past week and a half. On Friday, this short-term dollar-strengthening brought price down to an important support level (marked A on the chart), which has created a horizontal trading range bounded by the top two yellow lines on the chart. The bottom line of this horizontal consolidation also coincides approximately with a key 38.2% Fibonacci retracement level (the low-to-high retracement span being measured from the swing low on 2/7/2008 to the all-time high reached on 4/22/2008). The current bounce up off this support level is supported by oscillators like the displayed Stochastics, which have been entrenched in oversold territory for sometime now and are beginning to turn up. The technicals are therefore suggesting that the recent run of dollar-strengthening may represent less of a dollar-recovery, and more of a respite/retracement before a further bull run, or at least a further horizontal range consolidation. In the event of a further move back up, obvious resistance resides in the region of the all-time high around 1.6000. A breakdown below the current range, on the other hand, would find support at the top of the previous horizontal range, around the 1.5000 region.
Chief Technical Analyst
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