EUR/USD Weekly Outlook

EUR/USD's fall from 1.6019 extended further to as low as 1.5284 last week. But loss of intraday downside momentum was seen in bullish convergence conditions in 4 hours MACD. Subsequent recovery indicates an intraday low is already in place. Hence, initial bias remains on the upside this week and further recovery could be seen towards 4 hours 55 EMA (now at 1.5504) or above. But still, decline from 1.6019 should be in force and expected to resume as long as 1.5594 resistance holds. Below 1.5387 will flip intraday bias back to the downside. Break of 1.5284 will indicate fall from 1.6019 has resumed for next short term target of 1.4966 cluster support (61.8% retracement of 1.4309 to 1.6019 at 1.4962) and probably below.

In the bigger picture, as mentioned before, EUR/USD's rise from 1.4309 should have completed at 1.6019 with a diagonal triangle pattern that started at 1.5342 and with bearish divergence condition in daily MACD and RSI. sustained trading below 55 days EMA (now at 1.5484) will confirm this case and deeper decline should then be seen to 1.4309 and 1.4966 support zone. However, strong rebound from the current level, followed by break of 1.5594 resistance, will suggest that price actions from 1.6019 is probably just developing into another sideway consolidation. But still, short term risk is on the downside before sustained break of 1.6019 high.

In the longer term picture, there are various interpretations of the medium term up trend from 1.1639 but none of them is really convincing yet. Rather than focusing on the structure, we'd like to emphasize the pattern of a series of higher highs and higher lower since 1.1639 and as long as this pattern remains, the up trend from 1.1639 is more likely in progress than not.

In other words, focus is on 1.4309 cluster support (38.2% retracement of 1.1639 to 1.6019 at 1.4346, 61.8% retracement of 1.3262 to 1.6019 at 1.4315). As long as this cluster support holds and before any other clear sign of medium term reversal, this rise from 1.1639 is still expected to extend further. And, such rally is is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and could still extend to 100% projection of 0.8223 to 1.3668 from 1.1639 at 1.7084, even prolonged medium term consolidation will take place before resumption. However, sustained break of this 1.4309 cluster support, which will also have 55 weeks EMA (now at 1.4535) taken out too, will argue that the whole up trend from 1.1639 has already completed and have medium term outlook turned bearish.

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