The pair has been in a multi-year complex corrective down trend since Jul’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 would be also possible).
The rally from 1.2040 (Jul’12 low) could test the 1.3390/1.3485 resistance before reversing. A reversal below 1.2465/1.2300 would renew the bear trend. Medium-term downtrend view needs to be reassessed if the currency breaks above 1.3840 (61.8% retracement level).
The pair has been retesting the swing high at 1.3170 and the near-term rally could be a wave 5 (Alt- wave B of flat corrective wave (B)). Typical wave 5 divergences may be developing in daily oscillators. The rally has the potential to test Fibonacci resistance zone at 1.3225/1.3360. Immediate-term pullback is possible with hourly divergences and the 1.2990/1.2875 support is likely to hold now. A reversal below however dampens bulls and refocuses on 1.2735/1.2660.