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Forex pairs in this Article » EUR/USD

Last Thursday's analysis ended with the following predictions:

1. Slightly bullish bias due to bullish line of least resistance
2. Support at 1.3485 is firm
3. Resistance at 1.3600 seems quite firm
4. Might be a good strategy to fade these levels before the next breakout
5. Next break of support or resistance likely to be to the upside in the short-term, but move is likely to be short-lived
6. Hard to see the price going much higher than 1.3700

Let's take a look at the daily chart to see how things actually turned out

EURUSD Daily 102313

The bullish bias and prediction that the next break would happen to the upside were completely correct as was the implication that support was a bit stronger than resistance. However, the idea that fading 1.3600 was a good idea was quite wrong, as was the forecast that the price would not go much higher than 1.3700. It remains to be seen for how long the price will remain bullish following this breakout.

Turning to the future, let's start by taking a look at the weekly chart below

EURUSD Weekly 102313

We are seeing high prices that have not been reached for almost 2 years, since November 2011. We have to make the chart small so we can see the relevant history. Last week was a strongly bullish reversal candle that closed in its top quartile. Prices have followed higher this week to reach a near 2-year high. There is no obvious resistance ahead now until 1.3858. Below us, a previous weekly high at 1.3646 that is also this week's low could become a strong support level in any pull back next week. We can see that this area, which acted as strong support recently, coincides with the 50% Fibonacci retracement of the long-term large downwards move during 2011-2012. The 61.8% level, close to the possible price action resistance level at 1.3858, could also be key.

These are significantly bullish developments for the EUR/USD, particularly the holding above the 50% Fibonacci retracement level.

Let's drop down to the daily chart to try to get some more detail

EURUSD Daily-2 102313

The daily chart does not add much information, except to emphasise the strength of the support at around 1.3650, and to show that yesterday was a strong bullish reversal candle whose high has not yet been meaningfully broken this morning.

For the next few days a bullish bias should be maintained. Pullbacks to 1.3650 or close to that level, especially next week, should be excellent points to enter new longs. If we break yesterday's high early in today's London session, that will be a bullish sign. However we can expect overhead resistance from about 1.3830 to 1.3860, so it seems unlikely that this zone will be broken today.

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