EUR/USD: Weak Tone With Eyes On 1.3584/30 Levels

EUR/USD: The pair remains firmly biased to the downside short and medium terms as it continues to target lower prices following its rejection of corrective high at 1.3838 level the past week. As referenced in our past reports, we have our eyes on the downside while EUR trades and holds below its Feb 09’10 high/Feb 01’10 low at 1.3838/51 and the 1.4025/28 levels, its Jan 21’10 low/Feb 03’10 high. Despite its Friday print of a hammer candle (bottom reversal signal) and an almost flat weekly close, the pair retains its broader weakness activated from its 2009 high at 1.5143. In that case, below the 1.3584/30 levels will clear the way for the resumption of its medium term downtrend towards its .61 Fib Ret/May 18’09 low at 1.3422/09 and then its Jun 03’09 low at 1.3211.Its higher level chart studies are bearish and pointing lower supporting this view. However, the immediate risk to our analysis will be its Friday hammer print triggering a corrective recovery higher which could target its Feb 10’10 level at 1.3675 with a cut through there exposing its Feb 09’10 high/Feb 01’10 low at 1.3838/51. We expect a reversal of roles at these key resistance area capping further upside gains and turning the pair back down again, which is consistent with its broader medium term bearishness. Above the latter level if seen will bring the 1.4025/28 levels, its Jan 21’10 low/Feb 03’10 high into focus. On the whole, EUR continues to retain its medium term bearish structure as it looks to weaken further below the 1.3584/30 levels.