EUR/USD Triangle-Range Trading

EUR/USD (daily chart as of July 14, 2014) has been trading below 1.3670/1.3700 since May 22. Price touched a high of 1.3700 on July 1, but immediately retreated lower for the following trading sessions. It appears that the 200-day EMA is also moving lower away from 1.3670/1.3700. 1.3670 is the last significant low point of the prior uptrend, and the 200-day EMA is the pair’s long-term support since July 2013. 

Current price is trading in a triangle-like range between two short-term trend lines (bold blue lines on chart). If price breaks down below the lower border of the triangle and below the key dividing line of 1.3500/3477, it could continue its downtrend move. 

Trading strategy 1 – range trading: go long/short at the lower/upper border of the triangle range, exit at the range’s upper/lower border.

Trading strategy 2 – wait for the breakout: go short if below 1.3470 with the 1^st target at 1.3400 and the 2^nd at 1.3300; go long if above 1.3700, with the 1^st target at 1.3730/70 and the 2^nd at 1.3800.

The ECB cut its deposit rate to -0.1% in early June, and lowered the key interest rate to a record 0.15% to boost the economy and avoid deflation. Upcoming major risk events include:  Fed’s Yellen gives semi-annual testimony to senate committee, EUR-Zone Consumer Price Index – Core (YoY), and ECB's Draghi speaks in EU Parliament.

Support levels below:

1st support: lower border of the triangle range

2nd support: 1.3500/3477 (June 5 low / Feb 2 low)

3rd support: 1.3400 (November 21, 2013 low)

Resistance levels above:

1st resistance: 200-day EMA

2nd resistance: upper border of the triangle range

3rd resistance: 1.3735 (May 19 high)