The current recovery is seen as an intermediate one only within a broader downtrend, expected to be resumed shortly EUR/USD weekly chart:
Central Scenario: The odds remain in favor of a minimum decline to 1.2600 as long as the key-resistance zone between 1.3969 and 1.4219 is not taken out
The latest recovery of the EUR has astonished enough under the given conditions and considering that we have seen a decisive break below key-support at 1.3351 (int. 76.4 %) beforehand. The latter clearly indicated that we are most likely dealing with the green or the dark red scenario, which both imply that the broader down-consolidation will be continued and could ultimately revisit the A wave low from 2010 at 1.1876. That said and as the market has come fairly close to a massive resistance zone which stretches from 1.3969 (pivot) via 1.4045/74/95 (50 %/pivot/200 day MA) to 1.4219 (int. 76.4 %) we now see a fairly good risk-reward given to re-enter a strategic short-position with a minimum price target of 1.2600 (76.4 % on higher scale).
Down Potential: A minimum decline to 1.2600 with the option to extend to 1.1876 at a later stage.
Risk: The market breaks above 1.4219 to 1.4365 what would neutralize the prevailing negative bias.
Strategy: Sell 2 units EUR/USD at market, targets 1.2650 & 1.1900, stop at 1.4380
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J.P.Morgan
Global FX Strategy