Recovery will meet key hurdle at 1.20/1.22.
Having tested key support near 1.05/1.04 back in March, EUR/USD has embarked on a
recovery. It is noteworthy that historically this channel has lent support after elongated down
moves (e.g. post five year and six year downtrends in 1985 and 2000 respectively). Current
monthly close, if largely positive, would form a bullish engulfing.
The rebound since March has accelerated recently after the pair broke above a triangle within
which it consolidated for nearly five months. EUR/USD has hit an intermittent target of 1.1680,
the 38.2% retracement from last October. However, sustaining above the triangle limit of
1.1385/70, the recovery should be persistent. Monthly RSI too shows further room before it
touches a resistance trend and the pair is likely to head towards 1.1810/75, the weekly channel
limit and the 38.2% retracement from last year highs.
From an Elliot standpoint, this recovery appears to be the fourth wave within a larger downtrend
and still looks to be of corrective nature. Considering this, 2012 lows of 1.20/1.22 should be able
to block this move.
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