EURUSD Poised For A Major Slide
Despite the taper news in the US, the EURUSD or the fiber still managed to rise from a 2013 low of around 1.2800 all the way to a year-end score of 1.37464. For a time, it appears that it would breakaway further as it was able to rise over the 1.3800 marker. A major long term resistance at the same level, though, prevented it from escaping. As you can see from its weekly chart, a downtrend line since 2009 lines up well at the 1.3800 region. Given the level’s maturity as a selling mark, it is quite likely that the pair would indeed hit a major wall here and slide sharply soon after as it did in the past. If the pair fails to successfully breach the 1.3800 hurdle then the US dollar would likely strengthen further against the euro and send the pair back between the 1.2250 to 1.2500 support zones. A break above its recent high of 1.38935, however, would definitely be a significant event and send the pair to around 1.4500.
Now looking at the daily chart of the EURUSD, you can see that it has clearly encountered a wall at the 1.3800 resistance. A failed break that created a big shooting star Japanese candlestick pattern, which by the way occurred at a resistance, indicates that the pair may soon weaken. A dual bearish divergence between the price and its RSI also points to this possibility.
Given the EURUSD’s huge potential slide, we’re actually looking to short it on rally perhaps back at 1.3800 with a stop at 1.3910 and a target at 1.2200. A breach of the drawn uptrend line in its daily would also trigger a short for us.
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