EUR/USD Weekly Outlook

EUR/USD surged to new record high of 1.6038 last week but retreated on broad based dollar recovery since then. From a short term angle, initial bias remains mildly on the downside this week as correction from 1.6038 may extend further. Nevertheless, as long as downside is contained above 1.5611 support, rise from 1.5302 should still be in progress. Above 1.5949 will flip intraday bias back to the upside for 1.6038 high first. Break will confirm recent rally has resumed. However, note that a break below 1.5611 support will indicate that rise from 1.5302 has completed and open up a few bearish scenarios that focuses on 1.5284/5301 support zone.

In the bigger picture, medium term consolidation from 1.6019 should have completed at 1.5302 already. Decisive break of 1.6019 record high will confirm that medium term up trend has resumed and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. However, note that sustained break below 1.584/5301 support zone will argue that EUR/USD has completed a double top formation and suggest that a medium term top is in place and deeper decline should then be seen to 1.4309/4966 support zone.

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 lows 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 will argue that the whole up trend from 1.1639 has already completed and have medium term outlook turned bearish.

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