The pair has been in a multiyear complex corrective downtrend 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 is possible).
The rally from 1.2040 (Jul’12 low) could test the 1.3000/1.3285 resistance (38.2% retracement level is at 1.3150) ahead of key swing high at 1.3490 which is critical level for the medium term bearish view. A reversal above however favours bulls.
The pair’s corrective rally has broken the key level at 1.2750 and the weekly trend channel resistance last week. The recovery may be a larger wave [B]. Upside focus is now on 1.2900/1.2950 ahead of tough 1.3000 where the pair should pull back to neutralise overbought conditions. The immediate-term support is at 1.2700/1.2640. A break below would refocus on the 1.2500/1.2465 which should hold to continue the recovery. A break above 1.3000 would expose the 1.3100/1.3150 resistance next.
by Anantharajan .P, CMT (Technical Strategist, Precise Trader)