After failing to break 1.3486 and extend recent rally, EUR/USD reversed and dropped sharply. Initial bias remains mildly on the downside this week for lower channel support (now at 1.3146). We'd like to point out that as long as EUR/USD stays inside this channel, there is no indication of reversal yet and rise from 1.2625 could extend higher. Above 1.3332 minor resistance should flip bias back to the upside for 1.3486 and above. Nonetheless, sustained break of the channel support will suggest that whole rise from 1.2625 is finished at 1.3486 already. In such case, deeper fall should be seen to 1.2974 support for confirmation.
In the bigger picture, price actions from 1.6039 (2008 high) are treated as a long term consolidation pattern and there is no clear indication of completion yet. That is, price actions could remain corrective and relatively unpredictable. The near term question is whether the leg from 1.4939 is completed. As long as 1.2625 support holds, we'd slightly favor that it's finished and anticipate stronger rebound to 1.4246 and above. However, break of 1.2625 will indicate that such decline is still in progress for another low below 1.2625.
In the long term picture, EUR/USD turned into a long term consolidation pattern since reaching 1.6039 in 2008. Such consolidation is still in progress and we'd expect range trading to continue for some time between 1.1639 and 1.6039. The range sounds a bit uselessly large but yes, it's that large. For long term traders, anywhere below 76.4% retracement of 1.1639 to 1.6039 at 1.2677 could be treated as a buy zone while above 23.6% retracement at 1.5001 is a sell zone, until there is clear indication of breakout.