EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3228; (P) 1.3440; (R1) 1.3622; More

EUR/USD's recovery from 1.3258 is still in progress and could still extend further. Nevertheless, there is no confirmation of a short term bottom yet. Further decline is still in favor as long as 1.3785 resistance holds. Below 1.3258 will fall resumption to long term fibonacci level at 1.3053. On the upside, though, above 1.3785 will indicate that a short term bottom at least formed and bring stronger rebound.

In the bigger picture, note that EUR/USD is now sitting in an important long term support zone with a) 38.2% retracement of 0.8223 (00 low) to 1.6038 at 1.3053, 55 Months EMA at 1.3361 and the development 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 with focus turned back to 1.4867 resistance Break will confirm that a medium term bottom is in place. 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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