EUR/USD Range Trading Below Short-Term Downtrend Line

EUR/USD (daily chart as of February 10, 2014) climbed during the post-NFP trading sessions, with the weaker than expected US non-farm payrolls data released last Friday. Current price is under pressure below a short-term downtrend line connecting the December 27 high and the January 24 high.

The pair’s recent bounce occurred right above the daily EMA 200, which has been serving as strong support since September 2013. If we add another moving average line, the daily EMA 144 (a Fibonacci number) as shown on the chart, it appears that price has been following that line more closely.

Price broke down below the daily EMA 144 on January 31 with a relatively long bearish candlestick, but then formed a bullish “harami cross” pattern with a “doji” in the following session. That bullish reversal pattern significantly weakened the breakdown of the daily EMA 144 on January 31. The pair then bounced off the harami cross and made a bullish crossover of the daily EMA 144 again in the subsequent trading sessions.

Current price is trading in a range between the daily EMA 144/200 and the mentioned short-term downtrend line. Aggressive traders could set up a range-trading strategy, by entering an initial short position around the upper range with an initial profit target around the lower range. More conservative traders may wish to wait until a range breakout occurs.

Support levels below:
1st support: 1.3550 (February 7 low) or daily EMA 144
2nd support: 1.3480 (multiple lows) or daily EMA 200
3rd support: 1.3400 (multiple highs and lows)

Resistance levels above:
1st resistance: short-term downtrend line
2nd resistance: 1.3740 (January 24 high)
3rd resistance: 1.3810 (multiple highs)