EUR/USD Weekly Outlook

EUR/USD rebounded strongly to as high as 1.3080 last week but subsequent fall dragged 4 hours MACD below signal line, indicating that such rebound has completed. Initial bias is mildly on the downside for retesting 1.2423 support. Break will indicate that consolidation from 1.2329 has likely completed and recent down trend is resuming for 50% retracement of 0.8223 to 1.6038 at 1.2131 next. On the upside, above 1.3080 will indicate that rise from 1.2423 is still in progress for 1.3290 resistance or above. Though, upside is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption.

In the bigger picture, as discussed before, the strength of the fall from 1.6038 reinforces the case that whole decline from 1.6038 is developing into a five wave impulsive fall with first wave completed at 1.3881, second at 1.4867, third at 1.2329. Consolidation from 1.2329 might represent the fourth wave consolidation. Hence, another decline is still expected before making a medium term bottom. Below 1.2329 will target next long term fibonacci level of 50% retracement of 0.8223 to 1.6038 at 1.2131 or even further to 1.1639 key medium term support. On the upside, sustained break of 1.3768 cluster resistance (38.2% retracement of 1.6038 to 1.2329 at 1.3746) is needed to invalidate this view and indicate that whole decline from 1.6038 has made a medium term bottom.

In the long term picture, 1.6038 is no doubt an important long term top and the long term trend has definitely changed. The question is how far such down trend can go. Would EUR/USD retest historical low of 0.8223? There is no clear answer for the moment. Nevertheless, the impulsive nature of the fall from 1.6038 suggests that the development after EUR/USD makes a medium term bottom will be corrective in nature and then be followed by at least one more medium term decline before completing the whole long term down trend.

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