EUR/USD Weekly Outlook - May 26 to 30, 2014
EUR/USD failed in the attempt of the recovery below the resistance level indicated last week i.e. 1.3775. The pair went up to 1.3734 and fell sharply to touch 1.3615 before closing for the week at 1.3630.
The bearish outlook has become stronger with the break below 1.3643. The recent moves also represented a decisive break of 200-day moving average support and the mid-term support trend line. The double top pattern also strengthens the bearish outlook.
We now expect the pair to move towards the support of 1.3562 (low of the week of February 10th) and then possibly towards the 55-week EMA support, which is currently at 1.3546. Such a move will also complete the double-top pattern approximately. However, the completion of the double top-pattern will only take place if the decline extends towards 1.3440/1.3460. Considering the strong fall from just below the psychological level of 1.3400, even such a move cannot be ruled out. Please note that a minor support will be expected near 1.3600.
The break below 1.3672 has made the near-term bearish outlook stronger for EUR/USD as it also represented a slight break of the support trend line and 200-day moving average. However, we will stay neutral for further fall till there is a decisive break below 1.3643. On the weekly chart a double-top pattern has also emerged and that also suggests further consolidation. A decisive break below 1.3643 will confirm a decisive break of 200-day moving average, the support trend-line and also that the pair may decline further to complete the double-top pattern. Such a move should take EUR/USD first towards the support of 1.3562 (low of the week of February 10th) and then possibly towards the 55-week EMA support, which is currently at 1.3543.
On the upside, resistance should hold in the range of 1.3662 (5-day EMA) to 1.3687. Even a break of this resistance range should limit the upward consolidation up to the recent 1.3734. Any decisive break over 1.3734 will be the first indication of a near-term bottoming and a better indication will come if EUR/USD manages a break over 1.3775/1.3780. Such a move will also represent the break of 55-day EMA..
From a longer-term perspective, the price action has been in a rising channel. Please check the monthly chart of the main page of EUR/USD outlook. On the upside a break over 1.3905 should take EUR/USD to retest 1.3993 first and then 1.4000. A decisive break over 1.4020 will be required to suggest that the psychological pressure of 1.4000 is taken out. A better indication of that will come with a break over 1.4140 to 1.4148 resistance. Any decisive break over 1.4150 should bring further gains to retest October 2011's strong resistance of 1.4247. Interestingly this level is just 3 pips below the 76.4% retracement level of the above mentioned fall from 1.4940. Please note that though the pair had touched 1.4247 during that time but if we consider the weekly open and close prices then the effective resistance was 1.4148. To check on these facts please refer the previous updates titled "EUR/USD is in a resistance zone but focus remains upside" and "EUR/USD 2014 outlook – The pair is at two years high but is it done?"
EUR/USD price-action - Various views