EUR/USD (a daily chart of which is shown) continued its sideways consolidation this past week, even after having broken out above a short-term downtrend resistance line (in red) extending from the 1.4335 uptrend high. This trendline break was significant, but on the day after the breakout occurred (in the beginning of the past week), price retraced all the way back down to around the point of break. Closing out last week, the pair then rebounded off the trendline, now treating the line as support where before it was resistance. EUR/USD is currently still entrenched within a textbook uptrend, and the recent bearishness as represented by the noted short-term downtrend line can be viewed simply as a normal correction/retracement within the prevailing uptrend. Unless price breaks down substantially below the 1.3750 region, the pair can continue to be considered as moving within an overall uptrend. Furthermore, the potential head & shoulders reversal pattern that recently grabbed the attention of many forex traders has, for now, been effectively invalidated. For the upcoming trading week of June 29 to July 3, a strong breakout above last week’s high of 1.4135 would lend strength to the bulls’ hopes for an uptrend continuation. In this event, the next major resistance target to the upside would be a re-test of the 1.4335 uptrend high. A further breakout above that key resistance level would confirm an uptrend continuation. To the downside, the noted 1.3750 price region should provide major support for the current uptrend.

- James Chen, CTA, CMT

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