EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4028; (P) 1.4115; (R1) 1.4228; More

EUR/USD dives sharply to as low as 1.4004 in early US session and focus is now on 1.4000 support. Break there will suggest that whole recovery from 1.3474 has completed. Further break of 1.3826 support will indicate that fall from 1.4337 is likely resuming for trend line support (now at 1.3494). On the upside, while another rally cannot be ruled out, we have pointed out that momentum of rise from 1.3474 is unconvincing and the structure looks corrective too. Hence, we'd still prefer it to be limited below 1.4337 and bring at least another fall to below 1.3474.

In the bigger picture, rise from 1.2456 is treated as the third leg of medium term triangle consolidation from 1.2329 (first leg completed at 1.4719, second at 1.2456). It's possible that such rise has completed at 1.4337 already. Break of 1.3747 will add more credence to this case and firm break of channel support (now at 1.3494) will confirm and bring deeper fall to 1.2456/2884 support zone. Though, in such case, as we're favoring that it's developing into triangle consolidation, downside should be contained by 1.2456/2884 support zone and bring one more rise to complete the consolidation.

On the upside, above 1.4171 will delay the bearish case and indicate that rise from 1.2456 is still in progress. Nevertheless, as this rise is still treated as part of the medium term consolidation, it should be limited by 1.4719/4867 resistance zone. Hence, upside potential should be limited and focus will still be on reversal signal in case of another rise.

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