EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3357; (P) 1.3437; (R1) 1.3488; More

EUR/USD is still bounded in tight range today and overall outlook remains unchanged. As discussed before, with 1.3785 resistance intact, price actions from 1.3258 are treated as consolidation to fall from 1.4867 only and there is no indication of a bottom yet. Further decline is still expected even though the current choppy sideway trading might extend further. Break of 1.3258 will confirm that recent fall has resumed for next long term fibonacci level at 1.3053. On the upside, though, a break above 1.3785 will indicate that a short term bottom is at least formed, probably in form of a head and shoulder bottom pattern. Stronger rebound should then be seen and focus will be back to trend line resistance at 1.4400.

In the bigger picture, note that EUR/USD is now sitting in an important long term support zone with 38.2% retracement of 0.8223 (00 low) to 1.6038 at 1.3053, and 55 Months EMA at 1.3361. Developments in the new few weeks will be important to the long term outlook. Firstly, fall from 1.4687 as well as that from 1.6038 is still in progress as long as 1.3785 resistance holds. Sustained trading below mentioned 1.3053 fibo resistance and 55 months EMA will affirm that medium downside momentum is still strong in EUR/USD. Further break of 100% projection of 1.6038 to 1.3381 from 1.4867 at 1.2710 will add more credence to the case that whole down trend from 1.6038 is developing into a five wave impulsive decline. In other words, EUR/USD is probably just in the middle of such fall which should extend beyond 1.1639 low before forming a medium term bottom.

On the upside, however, above 1.3785 will firstly indicate that a short term bottom is in place. Secondly, this will argue that EUR/USD is drawing some support from mentioned support zone to form a medium term bottom. Stronger rebound should be seen in this case. Sustained break of the mentioned falling trend line resistance will add much weight to the case that medium term fall from 1.6038 has completed. Also, this will leave the decline from 1.6038 in three wave structure which suggests that the price actions from 1.6038 are developing into something that's corrective in nature. In other words, fall from 1.6038 is probably just a correction from the long term angle and will likely be contained above 1.1639 low even if decline resumes.

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