EUR may have been weak, vulnerable and lack any positive sentiment at the moment, but it may soon take a breather after an almost a parabolic move from the 1.5143 to 1.2142 levels in six months. The pair witnessed its strongest weekly close since embarking on its medium term weakness and that came on the back of a loss of downside momentum at the 1.2142 level, its 2010 low. Having said that, we have taken a critical look at the bottoms formed at 1.2328 in 2008 and at 1.2456 in 2009 from pure price analysis perspective and have found some form similarities with its current weekly reversal (and those of the 2008 and 2009). When you closely look at those two bottoms you will notice that the 2008/2009 bottoms and their subsequent rallies occurred with a minimum of three weeks of positive weekly closes. The most noticeable one was the 2009 bottom where the pair rallied for three consecutive weeks after hitting a bottom at 1.2456. We are not suggesting that the exact scenario will play out but that in technical analysis history is very a powerful tool allowing us to take a cue from those price actions. One difference from the price perspective is that the present reversal is even stronger with more momentum than those of 2008 and 2009 reversals. Note that with the ability of the pair to close strongly higher above its earlier broken supports at the 1.2328, 1.2456 and 1.2520 levels, we think the market is telling something. That in the near term EUR should embark on a strong corrective recovery. This also means that the 1.2328 and 1.2456 levels have provided a strong platform that EUR could stand on and corrective higher. However, the risk to our analysis will be a violation of the above mentioned supports and an eventual break of the 1.2142 level. Overall, while EUR remains dominated by its medium term broader weakness, we think that its loss of momentum at the 1.2142 level and its subsequent rally the past week carries a further upside potential nearer term.
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