EUR/USD Weekly Outlook

EUR/USD's rise from 1.5302 extended further to as high as 1.5908 last week but reversed sharply on profit taking since then. The break of 1.5843 resistance suggested that consolidation from 1.6019 has already completed at 1.5302 and rise from there represents resumption of the medium term up trend. Hence, the retreat from 1.5908, though steep, is still viewed as correction to rise from 1.5302 only and is expected to be contained by 1.5651 resistance turned support and bring another rally. Above 1.5776 will flip intraday bias back to the upside for 1.5908 first. Break will bring retest of 1.6019 record high. However, break of 1.5651 will dampen this view and turn outlook mixed.

In the bigger picture, a medium term top is in place at 1.6019 after meeting 1.6 psychological resistance. As mentioned before, break of 1.5843 indicates that such consolidation has likely completed at 1.5302 already. Further decisive break of 1.6019 will confirm this case and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. On the downside, however, below 1.5468 support will mix up the picture by firstly suggesting that rise from 1.5302 has completed. Secondly, it will revive the case that consolidation from 1.6019 is still in progress. Retest of 1.5302 support could be seen in such case.

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, with 1.4309 medium term support still holds, rise from 1.1639 is still in progress. Such rally 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 1.4816) 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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