EUR/USD Weekly Outlook

EUR/USD dived further to as low as 1.2512 but rebounded strongly since then. Such development suggests that decline from 1.4719 has completed with five waves down to 1.2512 and made a short term bottom there. Some more rebound should now be seen, targeting 1.3329 cluster resistance (38.2% retracement of 1.4719 to 1.2512 at 1.3355). However, note that the apparent impulsive structure of fall from 1.4712 suggests that rebound from 1.2512 is merely a correction. Having said that upside should be limited well below 1.3822 support turned resistance and bring fall resumption. Below 1.2512 will target 1.2329 low next.

In the bigger picture, the three wave corrective structure of the rise from 1.2329 to 1.4719 and the five wave impulsive structure of the fall from 1.4719 to 1.2512 is consistent with the view that fall from 1.4719 is resuming whole medium term decline from 1.6038. Sustained break of 1.2329 should confirm this case and target 1.1639 medium term support next. However, a break above 1.3822 resistance will dampen this case and argue that price actions from 1.2329 is indeed developing into larger scale consolidation. Though, upside should be limited below 1.4867 resistance and medium term down trend will just resume later.

In the long term picture, outlook is rather unclear for the moment. While 1.6038 is no doubt an important long term top, there is no clear answer on whether subsequent price actions from 1.6038 are unfolding as sideway consolidation, deep correction, or a reversal in trend. Nevertheless, note that another fall is still in favor as long as 1.4867 resistance holds and in such case, EUR/USD should at least have a test of 1.1639 long term support.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box