EUR/USD Range Trading below 200-Day EMA

EUR/USD (daily chart as of June 6, 2014) touched a fresh low of 1.3500 yesterday after the ECB’s unprecedented monetary-stimulus measures. Price then rebounded and reached a high of 1.3670, and once again closed right at the 200-day EMA. The pair did exactly the same thing on May 26, with a high of 1.3670 and a closing price at the 200-day EMA (two red arrows on chart).

As we have mentioned previously, 1.3670 is an important level to watch, which is the last significant low point (green arrow) of the prior uptrend. Note also that 1.3670 is now very close to the 200-day EMA, which together could serve as strong resistance ahead.

Today, price reached a high of 1.3675 after the US Non-Farm Payrolls data, but immediately retreated below the 200-day EMA as of this writing. It appears that the pair is still testing the 200-day EMA, which has been acting as major support since July 2013.

If the currency pair is capped by 1.3670 or the 200-day EMA, with price breaking down below the lower border of the large rising wedge (between line 1 and line 2), the pair’s current uptrend could end, followed potentially by a trading range or downtrend move.

ECB President Draghi cut the deposit rate to –0.1% yesterday and lowered the key interest rate to a record 0.15%. Draghi signaled more action might be needed to boost the economy and avoid deflation. Policymakers also opened a 400 billion-euro liquidity channel, and planned large-scale asset purchases.

Support levels below:
1st support: 1.3580 (multiple lows)
2nd support: 1.3500 (June 5 low)
3rd support: 1.3400 (November 21, 2013 low)

Resistance levels above:
1st resistance: 200-day EMA or 1.3670
2nd resistance: uptrend resistance line 2
3rd resistance: 1.3775 (May 12 high)