Today's Support and Resistance levels:
S1: 121.52 R1: 124.21
S2: 120.88 R2: 125.31
S3: 120.37 R3: 125.98
Technical overview:
The week started with a large gap down from 124.21 to 122.71. We expect support at 121.52 will protect the downside as this gap is closed. Gaps are not that common in the foreign exchange market and they are almost always closed immediately. As we regard the decline from 126.04 as wave ii of 5 it should also warrant a close of the gap soon as wave iii of 5 higher takes over. The only demand we have to wave ii of 5 is that it does not break below the start of wave i of 5 at 118.73 as that would invalidate our bullish count. On the opposite side, we would like to see a break above 124.21 and, more importantly, a break above 125.79, which will confirm the next rally higher in wave iii of 5 towards 133.54.
Trading recommendation:
We are long EUR from 124.65 with a stop at 118.70. If you are not long EUR already, then buy close to 121.52 with the same stop.