EUR/USD: Even with its current downside vulnerability, EUR continues to retain its consolidation to corrective tone started from the 1.3433 level.
Having said that, a break and close above the 1.3735 level must occur to trigger the resumption of that recovery. In such a case, additional strength will develop toward the 1.3787 level (Feb. 17, 2010 high) with a loss of there pushing the pair further toward its Feb. 1, 2010 high/Feb. 9, 2010 low at 1.3838/51. We look ahead to the latter zone to cap corrective recovery gains, if seen, and turn EUR back lower again in sequence with its broader medium-term downtrend. On the other hand, if a build up on its current weakness is seen, threats of a recapture of its 2010 low at 1.3433 cannot be ruled out where a break will activate more weakness toward the 1.3422/09 levels. Beneath the latter will set the stage for more downside pressure, targeting its June 3, 2009 low at 1.3211 and next its big psycho level at 1.3000. Overall, although the pair retains its broader medium-term bearishness, risk of a corrective recovery to consolidation continues to be seen.