EUR/USD Weekly Outlook

EUR/USD reversed sharply after edging higher to 1.5818 early last week and fell to as low as 1.5462 before recovering mildly. An intraday low is in place at 1.5462 and some more recovery could be seen initially this week. However, the break of 1.5486 cluster support (61.8% retracement of 1.5284 to 1.5818 at 1.5488) argues that whole corrective rebound from 1.5284 has completed at 1.5818 already. Hence, further downside is in favor after brief consolidation and below 1.5462 will bring retest of 1.5284 low. Break will confirm that whole decline from 1.6019 has resumed for 100% projection of 1.6019 to 1.5284 from 1.5818 at 1.5083

In the bigger picture, EUR/USD's rise from 1.4309 should have completed at 1.6019. Break of 1.5486 support indicate that rebound from 1.5284 has completed and correction from 1.6019 is going to go deeper and probably test 1.4966 cluster support (61.8% retracement of 1.4309 to 1.6019 at 1.4962). Though, above 1.5665 minor resistance will dampen this view and argues that rebound from 1.5284 is still in progress for retest of 1.6019 record 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 1.4648) 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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