EURUSD - Corrective

The Top chart is EURUSD (Day ÷ 3) Apr – May 2010, the lower chart is EURUSD (Weekly) through 2008 – early 2010.

There seems to be a close match between price action in the lower chart from Summer 2008 through to Spring 2009 and the recent period in the upper chart from late April to the current period. It is also noteworthy that both these period coincides strongly with sharp corrections lower in stocks and the move away from risk.

If this similarity were to continue, it could suggest that after some consolidation beneath the declining white trendline (with pullbacks probably limited to 1.2200), a breakout may occur towards the 1.2600 – 1.2700 region, though it is possible that a breakout may occur without consolidation should the EURUSD make a sustained break of the downtrend line. - The 1.26/1.27 area contains the 1.2672 20^th May retracement high. , it also has several key Fibonacci retracement levels. From there I would expect a period of consolidation. This would tally quite well with a return to the neckline of a multi-month Head & Shoulder pattern. Beyond that I have highlighted some other possibilities, including after some further corrective activity a move higher towards 1.2900 – 1.3000 (which have highlighted in blue). I have also highlighted a couple of other possibilities which given the nature of the bearish move recently, definitely can not be excluded…

- Note – Since this analysis, the pair has broken over the downtrend line posting an intraday high so far around 1.2450. However it has to sustain this break over the next few hours in order to provide some validation to it.