EUR/USD Retreats from Upper Edge of Uptrend Channel

EUR/USD (daily chart as of October 30, 2013) reached a high of 1.3830 on October 25, right at the upper edge of the medium-term uptrend channel (bold blue parallel lines on chart) that extends back to July 9. Note that the candlestick of October 25 is a white spinning top (arrow 1 on chart), with a small white body and long upper and lower shadows. Spinning tops, either white or black, are normally considered indecision candles. When those patterns occur at major resistance or support levels, they are potentially reversal warnings.

Note also that the candlesticks of October 22 and 23 signaled a slowing upside momentum, with a small black body completely contained within the range of the previous long white body (arrow 2 on chart). In addition, following the white spinning top on October 25, there were two black candlesticks with the last one touching a low of 1.3735, lower than the low of October 23, which was another weakening sign. The currency pair is under pressure at the major resistance level (upper edge of the uptrend channel) combined with several warning signals from candlestick patterns. A correction could be expected if 1.3830 serves as strong resistance.

Support levels below:

1^st support: 1.3710 (February 1 high)

2^nd support: 1.3650 or daily EMA 20

3^rd support: 1.3470 or the lower edge of the uptrend channel

4^th support: daily EMA 200

Resistance levels above:

1^st resistance: 1.3830 (October 25 high)

2^nd resistance: the upper edge of the uptrend channel

3^rd resistance: 1.4000 (key psychological level)

4^th resistance: 1.4250 (October 2011 high)