January 19, 2010
EUR/USD Analysis - Watch For A Breakout Below 1.4218 / 1.4141
I've been looking at the long-term charts of the EUR/USD pair today, and it looks like there could be significant downside potential if the price breaks below two key levels. Starting with the daily chart, the first target is 1.4218 which is simply the most recent low, and occurred just before Christmas last year.
Ordinarily it wouldn't necessarily be hugely significant if the price were to break through this level, but it's also worth pointing out that the CCI (200), which basically tells you the long-term trend, is hovering just above the 0 level. So a downwards breakout combined with the CCI (200) crossing below 0 (for the first time since 08 May 2009) would suggest that there's some weight behind this particular breakout, if it does occur.
If the price were to break through the second price target of 1.4141, then we really could see a long and sustained move downwards. This is because this is the level of the Supertrend indicator on the weekly chart. It is still bullish at the moment (and has been since May of last year) but a weekly close below this level would indicate the start of a new downward trend on this longer term chart.
Of course the price could easily move upwards from here and not trigger a downward breakout at all, but if you look at the monthly chart there are bearish divergence patterns emerging on several indicators including the Smoothed Repulse, MACD and CCI indicators. So there is a decent chance of a downward breakout occurring in my opinion, but we will have to wait and see.