EUR/USD Weekly Outlook

EUR/USD turns into sideway trading after dipping to 1.4571 initially last week. Bullish convergence condition in 4 hours MACD and RSI, as well as daily MACD's cross above signal line argues that a short term bottom is already in place. However, the recovery from 1.4571 was disappointing last week and was limited by 1.4807 resistance, without confirming the bottom. Initial outlook remains neutral this week. On the upside, above 1.4807 will add much more credence to the case that a short term bottom is formed. Further break of 1.4908 will confirm and bring stronger rebound to test 1.5284 double top neckline resistance before staging another fall. On the downside, though, below 1.4571 will indicate that recent fall is still in progress to key medium term support at 1.4309.

In the bigger picture, the double top reversal pattern (1.6019, 1.6038) serves as an important signal of completion of medium term rise from 1.1639 (05 low), which is supported by the decisive break of 55 weeks EMA. Weekly MACD turned negative last week, adding another bullet for this case. Though focus will still be on a) whether key support level of 1.4309, (38.2% retracement of 1.1639 (05 low) to 1.6038 at 1.4358, 61.8% retracement of 1.3262 to 1.6038 at 1.4322) will hold; b) whether next trend line support (1.1825, 1.2483, now at 1.4386) will hold; c) whether monthly MACD will cross below signal line for confirmation. On the upside, sustained break of double top neckline resistance is needed before considering that decline from 1.6038 has completely finished. Otherwise, another fall is still expected in case of rebound.

In the longer term picture, it's also early to conclude whether multi year up trend from 0.8223 (00 low) has completed too. Though, chance for a long term reversal will sharply increase if both monthly MACD and RSI breaks their own up trend line.

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