EUR/USD Holds Daily EMA 20 and Tests Long-Term Downtrend Line

EUR/USD (daily chart as of August 26, 2013) made a brief penetration of the daily EMA 20 on August 15 (arrow 2 on the chart), with a strong bullish candlestick which closed at 1.3344, about 90 pips above the EMA 20. On August 22, price once again tested the significance of the EMA 20 (arrow 3) with a long lower shadow doji, showing strong support at the line. As long as the EMA 20 holds, the pair should continue its upside momentum and keep testing the long-term downtrend line (bold blue trend line).

Note that the downtrend line is also the upper boundary of a large triangle (monthly chart), which could be considered a correction or consolidation of the uptrend that started back from October 2000. Watch closely the price action against that long-term downtrend line. Significant price movement might be expected ahead. The daily MACD is flat above zero indicating a ranging market and slowing momentum. The daily RSI is also flat between 50 and 70.

Trading strategies:

Bullish if price can hold the daily EMA 20 and break above the long-term downtrend line.
1st resistance: 1.3450 (August 20 high)
2nd resistance: 1.3520 (Feb 13 high)
3rd resistance: 1.3600 (Feb 5 and Feb 6 high)
4th resistance: 1.3710 (Feb 1 high)

Bearish if the long-term downtrend line serves as strong resistance and price breaks down below the daily EMA 20.
1st support: 1.3300 (August 22 low)
2nd support: 1.3200 (August 15 low)
3rd support: 1.3060/3100 (July 18 low)
4th support: 1.3000 (key support/resistance)