EUR/USD dropped sharply to as low as 1.3585 last week and the strong break of 1.3737 cluster support further confirm our view that three wave consolidation from 1.2329 has completed at 1.5143 already. Initial bias remains on the downside this week for 61.8% retracement of 1.2329 to 1.5143 at 1.3404 first. Break will target 161.8% projection of 1.5143 to 1.4217 from 1.4578 at 1.3076 next. On the upside, above 1.3744 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 1.4025 resistance and bring fall resumption.
In the bigger picture, three wave rise from 1.2329 is treated as consolidation to fall from 1.6039 only and should have completed at 1.5143 already. Fall from 1.5143 is tentatively treated as resumption of the whole down trend form 1.6039 and should target a new low below 1.2329. Break of 1.4217 resistance is needed to be the first signal of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.
In the long term picture, long term up trend from 2000 low of 0.8223 has made an important top at 1.6039 in 2008. Subsequent price actions are so far viewed as a correction only, in form of three waves. First wave has completed at 1.2329 while secondly should have completed at 1.5143. Fall from 1.5143, as the third wave of correction, is in progress and should extend to 1.1639 support, and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143. Nevertheless, we'd expect strong support from 61.8% retracement of 0.8223 to 1.6039 at 1.1209 to conclude the correction and bring another long term up trend.