(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; horizontal support/resistance line in yellow; 200-period simple moving average in light blue.)

8/15/2008 – EUR/USD – Although most technical signals on the EUR/USD daily chart, as shown, are indicating extremely exhausted and oversold conditions, downward momentum currently appears almost unstoppable. Logically, there should be a potential impending correction to the drastic plummet that is occurring, but the point at which this correction actually happens is the big question on most traders’ minds.

At the current juncture, price is already deeply entrenched within the previous horizontal trading range that was in effect from late last year to early this year. In addition, the pair is currently just around 300 pips away from hitting the long-term uptrend support line (represented on the chart in green), which currently resides around the 1.4400 region. This uptrend line is a strong support factor, and if it gets broken to the downside, we would no longer consider the pair to be in a long-term uptrend. If a major correction occurs sooner than hitting that support trendline, on the other hand, the 1.4960 level (which represents the top of the previous trading range) continues to serve as major resistance going forward.

James Chen

Chief Technical Analyst, FX Solutions

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