EUR/USD's retreat from 1.2466 was rather brief and was contained above at 1.2209 and turned sideway. Initial bias remains neutral this week. Above 1.2466 will indicate that recovery from 1.1875 has resumed for 38.2% retracement of 1.3691 to 1.1875 at 1.2569 and above. But we'd expect strong resistance at 1.2671 to limit upside and bring down trend resumption. On the downside, below 1.2209 will indicate that such recovery is completed and flip bias back to the downside for retesting 1.1875 low.
In the bigger picture, fall from 1.5143 is part of the whole down trend from 2008 high of 1.6039. Such decline is expected to develop into a five wave sequence and target 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. We'd expect the current rebound from 1.1875, which is viewed as the fourth wave inside the five wave sequence from 1.5143, to be limited by 1.2671 resistance and bring one more fall. Nevertheless, sustained trading above 1.2671 will be the first alert that EUR/USD has bottomed earlier than we thought and will turn focus to 1.3266/3691 resistance zone.
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, we'd expect strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 support to contain downside and bring another long term up trend. However, note that sustained break of 1.1209 key fibonacci level will dampen this view and open up the case of a take on parity.