A sharper than forecast rise in the pace of fourth quarter gross domestic product in the United…

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We’re likely to close the week on a bearish note. New hourly and daily lows are still being made, and there is a good chance for a final breakdown soon. Prices remain capped by the declining trend line and are unable to even rally close to it. RSI is bearish but has remained above oversold. There is no indication that this downtrend is stopping anytime soon ahead of 1.3745.

Support: 1.3830 L-7-8   1.3745 DFibo38   1.3665 FiboExt of Dly Move

Resistance: 1.3986 HSpptRsst   1.4045 HSpptRsst   1.4130 HSpptRsst

RSI: Hrly: bearish, Dly: bearish, capped by decl. TL, near o/s

Hourly Chart:

On January 27, the EUR/USD (exchange rate between the euro and U.S. dollar and the most widely trade forex pair) slipped below $1.40 for the first time in six months. In other words, the dollar, considered by most analysts all but doomed a short while ago, now stands at a 6-month high against its main competitor. Ironic? Paradoxical? You bet. Here’s more on that from Robert Prechter.

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The U.S. dollar is likely to face increased volatility over the next 24 hours of trading as economists forecast GDP to expand at an annual pace of 4.6% in the fourth-quarter, which would be the fastest pace of growth since the first three-months of 2006, and conditions are likely to improve going forward as the expansion in monetary and fiscal policy continues to feed through the real economy.

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Down pressure persists, and the gentle roll over pattern that the EUR/USD pair performed over the last few days is difficult to trade if you’re waiting for a bounce to go short. It’s exactly that “waiting for a bounce to short it” that maintains pressure on the market, with the result of it dropping further and further. It is now more likely than not that we’ll reach key support at 1.3745 this way, without a major bounce. This bounce will probably come after this level is reached or even broken, when the market looks “completely bearish”.

A short term correction up cannot be ruled out since RSI is moving in oversold territory, but there are no signs of a reversal yet. Expecting further downside with little support ahead of 1.3750.

I missed my oppportunity to add a second position near 1.42 and will be content with my first position. I tightened my stop on this position to 1.4355.

Support: 1.3935 L-1-27   1.3830 L-7-8   1.3745 DFibo38

Resistance: 1.4045 HSpptRsst   1.4130 HSpptRsst   1.4207 HSpptRsst

RSI: Hrly: bearish, Dly: bearish, capped by decl. TL, near o/s

Hourly Chart: