EURUSD: The pair followed through lower on the back of its failure at the 1.4578 level, its 2010 high to break below its strong support at the 1.4216 level(Dec 22'09 low) and resume its weakness started from the 1.5143 level(2009 high) the past week. Further downside weakness remains on the cards but the only immediate risk is a corrective recovery of the mentioned declines which is now shaping up(clearly seen daily chart). We expect that such a correction should be brief and limited to the 1.4216/62 area. Having said that, nearby downside target stands at the 1.4044 level, its Aug 17'09 and subsequently its Jan 22'10 low/big psycho level at 1.4028/00. We see this level capping declines temporarily but if decisively violated, additional downside weakness should follow towards its July 08'09 low at 1.3831 and next the 1.3747 level, its Jun 16'09 low. Its weekly stochasticsand RSI are bearish and pointing lower suggesting further downside. However, we are suspicious of any fresh weakness at this stage as price action on Thursday and Friday now suggests the pair may be shaping up for a corrective recovery. If this is triggered, we will be watching the 1.4216/62 level s where a halt is envisaged to turn the pair back down but if that zone is eroded, EUR may develop further strength towards the 1.4413 level, its Jan 19'10 high and possibly higher toward the 1.4578 level, its Jan 13'10 high.
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