As the EURUSD mid-term bullish scenario we mentioned many times before is gradually losing steam (1.39-1.43 area), the time has come for one side to tip the scale in its favor and set the tone in the market for the months to come. What are we waiting for the weeks/months ahead?
On a larger scale, I see EURUSD bearish longer-term, as the weekly & monthly trends remain active. Even if the bull scenario could prevail for now, I don’t see much above 1.4480 - 1.46, which is my bullish target area mid-term. Only if these levels are cleared we can look further up towards 1.51, where the large upward correction should eventually come to an end.
For the time being, as long as we are comfortably supported above 1.39, the bulls are arguably in control. Short-term (H1 & below) we are in a correction since 1.4117, however the current move needs serious confirmation lower & before that happens a test of 1.4170-1.4200 is probable. The 1.42 area is a major crossroad on my charts, since it is here that the mid-term & the long-term scenarios collide. Once EURUSD touches these levels, anything is possible and not surprising, but the odds will shift for a continuation to 1.4488 (the 127% extension of the last corrective wave 1.4337 - 1.3747) & later 1.46. A vry abrupt rejection would point to the bear scenario below.
On the other hand, it would only take the bears a few hundred pips to make a strong comeback into the game and take the lead down to 1.35, 1.29 & eventually even 1.10 longer-term. Since the long-term is still bearish (but losing strength as the bulls manage to keep current levels), a shift in mid-term sentiment to bear would have important consequences & could lead to a strong resumption of the bear trend started last year.
The H4 scenario above currently has lower chances of being confirmed, however if it is I am expecting big black bears to appear from the bushes around 1.3750. As the blue corrective wave indicated above cannot develop completely before breaking important support levels (& bear confirmation levels long-term), a possible bear victory of the current mid-term battle could win the entire war. Once EURUSD establishes a new range below 1.35 the bears are likely to gather enough strength to give the market a new dynamic quite different from what we saw in the first half of the year. Time will tell…
In conclusion, I am preparing the big guns & canons for what’s next. As the two sides clash, I think there’s no need to take sides yet. As traders, opportunism is a great quality & a window of opportunity: we want to know the winner before committing ourselves completely. I’m watching the key levels closely & in the meantime trade small with small expectations. Below 1.4080 the bias is short, short-term indicators down, H1 active wave bearish.