EUR/USD

Did euro reverse its 2 year-long downtrend? EUR/USD broke down its long-term moving average in September 2011. Since then it has been trending below the 200 day moving average with one exception in October 2011, which was a 3 day spike above the long-term average and was not a valid breakout. In July 2012, EUR/USD reached 1.20 levels. Rebound from the oversold levels carried EUR/USD to the trend resistance at 1.2650. It didn’t take long for the cross rate to clear this resistance in September 2012. Breakout was followed by a sharp rally towards 1.3150 levels. During this rally EUR/USD breached the 200-day moving average for the first time in one year. In the last two months we have seen a pullback to the long-term average which is now forming support at 1.2860. If EUR/USD can stabilize above the long-term average at 1.2860 levels, we are likely to see the continuation of the strength in the euro. It is important for the cross rate to hold above this support. Failure to hold above 1.2860, could send EUR/USD back to 1.25 levels.