The pair has been in a multi-year complex corrective downtrend since July ’08. We prefer to view the setback from 1.4945 (May’11 high) as a wave (Y) of the large corrective pattern which is likely to retest the key swing low at 1.1870 on multi-month basis (a break lower is also possible). The rally from 1.2040 (July ’12 low) could test the 1.3285/1.3485 resistance before reversing. A reversal below 1.2465/1.2300 would renew the bear trend. The medium-term downtrend view needs to be reassessed if the currency breaks above 1.3840 (61.8% retracement level).
Strong reversal from 1.2660 has opened up two possibilities; (i) Retest of 1.3140/1.3170 in a wave [b] OR (ii) A push above 1.3170 in a wave [v]. Immediate-term weakness is likely to hold above 1.2880/1.2800 to keep the near-term bullish view intact. A break above 1.3170 would expose 1.3200/1.3285 next. A reversal below 1.2800 however refocuses on 1.2660 initially.