EUR/USD - Weekly Forex Analysis For March 30 - April 3, 2009

EUR/USD (a daily chart of which is shown) consolidated for most of last week after rising dramatically during the prior week. But on this past Friday (3/27/2009), the consolidation was unexpectedly broken to the downside with a forceful 300-pip plunge.

Originally, a well-defined bullish pennant pattern was in the making, but Friday’s drop invalidated the pennant as a continuation pattern, and transformed it into a potential reversal pattern. This pattern also occurred around an important downtrend resistance line extending from the second test of 1.6 back in July.

Price has, for the time being, respected this trendline and settled down to end the past week around major support in the key 1.3300 support/resistance region, which represents a critical juncture. The beginning of the upcoming week of March 30 to April 3 should provide indications as to the pair’s directional bias going forward.

Any substantial move below 1.3300 should head straight toward 1.3000, a critical price region from a trend perspective. Any move below that level could invalidate the recent double-bottom trend reversal.

Conversely, a subsequent breakout above the noted long-term downtrend resistance line would help confirm a new uptrend targeting immediate further resistance around 1.3850.

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