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EUR/USD 2014 outlook – The pair is at two years high but is it done?

December 28, 2013 2:19 am GMT+0  in Chart Alert

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EUR/USD has not only broke over the high of 2 years but also broke over the 61.8% retracement of the great fall from 1.4940 to 1.2041 by jumping to 1.3894.

Though a strong resistance was witnessed before the pair could enter 1.3900 ranges and hence the psychological resistance territory of 1.4000 but this break strengthens the bullish outlook further. Some other points to be noted from the above chart that the 76.4% retracement, which we get by deducting 23.6% Fibonacci retracement from 100.00, is just 3 pips above one of the very strong previous resistance level.

EUR/USD weekly chart – the break over 61.8% retracement

EUR/USD brings more bullish outlook by breaking over the 61.8% retracement - Weekly chart

Let’s also have a look on the bigger picture by checking the past 10 years’ price action.

EUR/USD’s price action during past 10 years

EUR/USD's historical chart of past 10 years.

The above chart is indicating the fact that the price-action had clearly missed forming a double-top chart pattern when the pair bad missed retesting the low of 1.1877. Any break below 1.1877 would have formed an approximate double-top formation by one top at 1.5144 and another slightly below that at 1.4940.

EUR/USD 2014 outlook

With only 2 trading days remaining in the year 2013, it’s time to see what we can expect in the year 2014 from the point of view of pure price-action analysis.

The bullish sentiments are clearly strong for the euro. The break over 1.3500 during September 2013 was the first indication and the recent jump which took the pair to 2 year’s high and also over the 61.8% retracement came as another strong indication for the underlying bullish sentiments. A break over 1.4000 should now only be a question starting with “When” and not with “Whether”.

Targets above 1.4000

Any decisive break over 1.4000 should take EUR/USD to at least half way through to the next psychological level of 1.4500 i.e. towards the resistance zone of 1.4240 to 1.4250. As mentioned above, it is interesting that the 76.4% retracement of the fall from 1.4940 is just 3 pips above the resistance level of 1.4947. If the pair breaks above this resistance then it should target 1.4500. This level will not be just a psychological resistance but will also bring in the resistance of the trend-line as indicated in the 10-year’s chart above.

What may change the above outlook

The trend line support for EUR/USD

A support trend-line has emerged as indicated in the weekly chart above. Any failure of this support would be the first indication of a near-term topping. This support should hold near 1.3560 which is also important because of the support of the psychological ranges of 1.3500. However, overall a failure of 1.3500 support will indicate that EUR/USD might have already done it’s best .

Please share your opinions in the comment box below to discuss the price action and possibilities further. You may also like to check the EUR/USD outlook which is updated weekly.

Connect the author on Google at +Himanshu Jain

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