Good day traders.

The EURUSD is in a clear down trend and with the announcement of QE by the head honchos in the eurozone out this Thursday, it just might make the this pair heavier than ever. Nevertheless, we should also understand the possibility of this pair retracing from extreme bearish levels. At the current moment, this is what the pair is trying to do, testing out resistance levels and testing the out the bears to see how strong they can hold out to their trades.eurusd H4

From the 4 hour chart above we can see that there is a bigger trend channel that the pair has broken out from. The smaller channel that we are in now shows that the pair is in a steep decline and the catalyst for the break below the main larger channel is the now famous Swiss National Bank (SNB) move to clear the floor for the EURCHF. The move by the SNB led to many parties selling the Euro and this happened not only against the CHF but against other currencies as well. Now that the pair is below the main channel, a clear technical indication that the bulls would want to take this higher again is when price starts to go above the “smaller channel”. Before that happens, it has to pass above the middle part of the smaller channel which is marked by the dotted line running through the middle of the channel. Thirdly, after the price breaks out of the smaller channel and goes back into the main bigger channel, which would mean prices above 1.17, we might see the pair test higher levels at 1.186, 1.1955 and 1.20 (closing the gap which was created on the 4th January 2014).

Other trading houses like Nomura for example did iterate that if the ECB’s decision to introduce QE lacks details or show some hesitancy in carrying out that decision, the euro could surge to $1.20.

On the downside, we would have to look at the higher time frame charts to see where the possible support levels are residing. With that, I have inserted the EURUSD weekly time frame chart below to allow us to chart the support levels just in case the bears decide to claw their way down.

eurusd weekly chartLooking at the EURUSD chart on the weekly time frame above, we can see that the pair has breached support at 1.16389 which was last seen around November 2005. Having broken that level, we can possibly say that there is a possibility that the pair might test that level from below in the near future. The next support level on the downside is at 1.13747, the low that was last seen on 3rd November 2003. If ever that support zone is broken, we might see the pair test the 1.10 round number level and if that is smashed we can expect to see the 1.07632 level, last seen on the 1st September 2003. Ok, let us now summarize the support levels.

1st Support: 1.13747

2nd Support: 1.10 (Round Number)

3rd Support: 1.07632

There you have it, the possible resistance and support levels for the EURUSD.

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~ Ardy ~ Forex Blog for Serious Forex Traders