The EUR/USD rally extended from 1.1408 to 1.1848 last week, but failed to break the 61.8% retracement from 1.2081 to 1.1408 at 1.1824 decisively. The initial bias turned neutral this week for the first time. On the upside, continued trading above 1.1824 will pave the way for a retest of the 1.2081 high. However, a strong break of the support at 1.1662 would bring a deeper decline towards the bottom at 1.1408 instead.
In the bigger picture, strong support from the 38.2% retracement level from 1.0176 to 1.2081 at 1.1353 suggests that a pullback from 1.2081 is likely a corrective move. Strong support was also found at the 55 W EMA (now at 1.1507). Focus is back on the key cluster resistance level 1.2. A decisive breakout there would have long-term bullish implications. However, breaking the support 1.1408 will revive the bearish trend reversal in the medium term.
In the long-term picture, the 38.2% retracement from 1.6039 to 0.9534 at 1.2019, which is close to the psychological level of 1.2000 is key to the outlook. Rejection at this level would keep the multi-decade downtrend from 1.6039 (2008 high) intact, and keep the outlook neutral at best. However, a decisive break of 1.2000/19 would signal a reversal of the long-term upside trend, targeting the 61.8% retracement levels at 1.3554.
