The situation with the euro remains the same. The rally from the June 7 lows continues with no strong signal of a short term correction, although circumstantial evidence is mounting. The longer term target for the rise remains bullish, in the 1.30s as it is probable we are in an intermediate Elliot wave 4 so the bigger picture is still bullish.

   The rise so far may have taken the shape of a zig-zag although it is unclear how far progressed it is as the waves are too different from the ideal. Prices continue making new daily highs despite fierce overhead resistance.

   The strongest evidence for a short term correction is on the Dollar Index chart which shows price halting at a strong support level. On EUR/USD momentum is diverging bearishly and chikou span has hit resistance on the cloud chart but these alone are insufficient. Stochastics has given a partial sell signal, showing the rally may be running out of steam, but it is still in the overbought zone. Finally a decisive trend-line break at around 1.2350 would be necessary for a more bearish outlook in the short term.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst