EUR/USD jumped further to as high as 1.3860 last week but formed a short term top there on bearish divergence condition in 4 hours MACD and dropped sharply. Initial bias remains mildly on the downside this week for 38% retracement of 1.2873 to 1.3860 at 1.3483 first. But after all, there is no change in the cautiously bullish outlook yet. Fall from 1.4281 should have completed with three waves down to 1.2873. Hence, downside of the current pull back should be contained by 1.3253 cluster support (61.8% retracement at 1.3250) and bring another rise. On the upside, above 1.3675 minor resistance will turn bias back to the upside for retesting 1.3860 first.

In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. The firm break above 1.35 psychological level again affirm the case that fall from 1.4281 was merely a correction only and whole rise from 1.1875 is still in progress. Also, note that break of 1.4281 will revive the case that medium term correction from 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. On the downside, though, below 1.2873 will turn focus back to 1.1875 low.

In the long term picture, considering the five wave impulsive structure of the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, firstly, we'd expect strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 to contain downside. Secondly, we'd expect another high above 1.6039 eventually, after correction from 1.6039 is confirmed to be finished.

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