EUR/USD Weekly Outlook

EUR/USD's sharp fall and successive break of 1.3881 low and 1.3851 key medium term support confirms that whole medium term decline from 1.6038 has resumed. Friday's mild recovery and touching of 1.3904 minor resistance may indicate that an intraday low is in place. Initial outlook is neutral this week and some consolidation could be seen. Nevertheless, recovery should be limited well below 1.4297 cluster resistance and fall resumption. Below 1.3702 will indicate that EUR/USD's fall has resumed for next short term target of 61.8% projection of 1.6038 to 1.3881 from 1.4867 at 1.3543

In the bigger picture, sustained trading below 1.3851 medium term support will confirm that whole decline from 1.6038 has resumed. Next medium term target will be 61.8% retracement of 1.1639 to 1.6038 at 1.3319. So far, the strength of the fall from 1.6039 and the structure argues that it's something of a larger degree. The case of long term reversal is also building up. Nonetheless, note that EUR/USD will enter into an important support zone with a) prior medium term high at 1.3668 (Dec 04 high); b) 38.2% retracement of 0.8223 (00 low) to 1.6038 at 1.3053 and c) 55 Months EMA at 1.3359. EUR/USD could at make a short term bottom between 1.30 and 1.36 stage a noticeable rebound before resuming the down trend. Hence, it's not advisable to chase decline when EUR/USD enters into this zone and profits on short positions could be taken if reversal signal occurs.

On the upside, a break above 1.4297 resistance will be the first alert term EUR/USD could have bottomed out in medium term term. Further break of 1.4867 resistance will confirm and bring larger scale consolidation before resuming the medium/long term down trend.

In the longer term picture, the case of completion of multi year up trend from 0.8223 (00 low) is also building up with monthly MACD staying well below signal line and RSI's breaking it's up trend. Though, it's early to conclude yet for the moment with EUR/USD still holding above 55 months EMA (now at 1.3359.) Focus will be on whether monthly MACD will break it's up trend and whether key fibo support of 38.2% retracement of 0.8223 to 1.6038 at 1.3053 will be taken out decisively for further evidence. Note that, upon confirmation of long term reversal, the current fall from 1.6038 should eventually retest medium term low of 1.1639 at least, with much prospect of reaching 61.8% retracement of 0.8223 to 1.6038 at 1.1208 and below.

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