EUR/USD Further Declines Expected if Below Daily EMA 50

EUR/USD (daily chart as of April 4, 2014) broke down below the key daily EMA 50 support on April 2, confirmed by a strong bearish candlestick on April 3 with a long upper shadow attached. If today we have a closing price below the daily EMA 100, it would add more downside pressure to the currency pair.

Note that the breakdown of the daily EMA 50 that occurred on March 27 was not confirmed. There was a bullish candlestick that had a long lower shadow attached to a small white body (two gray shapes on chart for comparison). We require a very strong up/down session along with follow-through price action to confirm a major resistance/support breakout.

If the pair stays below the daily EMA 50 or the short-term downtrend line (line 3 on chart), the second downside target would be the daily EMA 200 or the medium-term support line (line 2). ECB President Draghi suggested yesterday that policymakers are ready to take further easing action, or lower interest rates, in order to avoid the risk of deflation in Europe.

Support levels below:
1st support: daily EMA 100
2nd support: 1.3640 (February 27 low)
3rd support: line 2 or daily EMA 200

Resistance levels above:
1st resistance: 1.3750 or daily EMA 50
2nd resistance: 1.3820 (April 2 high)
3rd resistance: 1.3875 (March 24 high)