EUR/USD edged higher to 1.2721 last week but lost momentum ahead of medium term falling trend line resistance and retreated. Intraday bias is neutral initially this week. As noted before, we expect strong resistance at the medium term falling trend line to conclude the whole recovery from 1.1875 and bring down trend resumption. Break of 1.2479 support will flip intraday bias back to the downside. Further break of 1.2149 will confirm that such recovery is finished and medium term fall is resuming for another low below 1.1875. Nevertheless, note that sustained trading above the trend line (now at 1.2716) will invalidate our view and bring stronger rally towards 1.3266 resistance instead.
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 trend line resistance (now at 1.2716) and bring one more fall. Break of 1.1875 will target next key support level at 1.1639. Nevertheless, sustained trading above the trend line 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.