EUR/USD breaks down below major support
James Chen October 23, 2015 10:10 PM
<p>In the face of continued dollar strength on Friday and continued pressure on the euro from Thursday’s dovish ECB press conference, EUR/USD has broken down […]</p>
In the face of continued dollar strength on Friday and continued pressure on the euro from Thursday’s dovish ECB press conference, EUR/USD has broken down below a major confluence of support factors.
These support factors include the key 1.1100 support level, the 200-day moving average, and a well-defined uptrend support line extending back to March’s 12-year low below 1.0500.
This major breakdown after a prolonged period of consolidation reasserts the long-term downtrend that has been in place since mid-year last year.
For the past six months, EUR/USD has been consolidating within a wide trading range with a slight tilt to the upside. Although the currency pair is still technically within this range, the overall directional bias has decidedly reverted back to the downside with the current breakdown.
For the past week, EUR/USD has retreated sharply from the upper border resistance area of this trading range as the dollar has rebounded and the euro has slumped. Thursday’s ECB press conference sharply accelerated that slump after ECB President Mario Draghi made comments indicating that the central bank would be open to further quantitative easing.
Now that this key technical breakdown has occurred, EUR/USD should resume targeting its main downside objective at the 1.0800 support level, which is the bottom border of the noted trading range. Any further breakdown below 1.0800 could then begin to target long-term lows around the 1.0500 support objective.
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