EUR/USD continues to face downside pressure following through lower on its Wednesday losses and targeting its 2010 low at 1.2520 Friday.
A corrective rally initiated from its 2010 low lost upside momentum at the 1.3093 level on May 10 and subsequently collapsed culminating in its current weakness. While the weakness is within its broader medium-term downtrend started from the 1.5143 level in November 2009, we're concerned about what may unfold as the pair is pressure on the downside.
We note on the weekly chart two massive support levels, which have held in the past and which we think should present a considerable support as EUR approaches them.
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The first support level stands at the 1.2456 level which held in March 2009 and acted as a platform that propelled EUR's rally that terminated at the 1.5143 level in November 2009. The second comes in at the 1.2328 level, its October2008 low. This one halted the pair's declines started from the 1.6037 level in July 2008. Furthermore, since those levels have held in the past they are likely to hold again as supports and turn the pair back up. Another thing is that since a level like 1.2456 -- which has never been tested since it was printed in March 2009 -- it is even more likely to hold on an initial test.
In case of a break of the 1.2328 level, we will be looking for more declines towards the 1.2121 level, its .50. Fib Ret (0.8225-1.6037 rally, monthly chart) and then the 1.2000 level, its big psycho level.
All in all, while EUR retains its broader medium-term downtrend and is weakening, it is now approaching key levels that may offer a massive support and turn it back up.
Mohammed Isah is a technical strategist and head of research at FXTechstrategy.com, a technical-research Web site. He has been trading and analyzing the foreign exchange market for the past seven years. He formerly traded stocks before crossing over to the forex market, where he worked for FXInstructor LLC as a technical analyst and head of research before joining FXTechstrategy.com. He has written extensively on the forex market and technical analysis and his articles have been featured in The Technical Analyst Magazine, The Forex Journal Magazine, The International Business Times and FXstreet.com. At FXTechstrategy.com, he writes daily, weekly and long-term technical commentaries on currencies and commodities, which are offered to its clients. He also produces
for his subscribers. He provides full coverage of the forex market with specific focus on G10 currencies as well as the commodities markets, with focus on five key commodities.