With euro zone interest rates remaining at the all time low of 0.1% and comments from ECB Governor, Mario Draghi, last week that continued downside pressure is being observed on the euro zone economic area and the ECB stands ready to extend its program where necessary, we perceive capital flowing readily out of the euro for greener pastures thereby reducing the demand for the shared currency.
We are of the opinion that EURUSD price action from the 24th of August 2015 constitutes a medium term top to the consolidation that started way back on the 16th of March 2015. Last price action is seen as the beginning of a brief consolidation due to an overbought US dollar that should find resistance at the 1.12452 area and is viewed as a possible wave ii of II of 3. After which resumption of the downtrend should continue. Break or price close below the 1.11247/1.11120 cluster zone should target the 1.09054/1.08772 cluster zone first as shown.
Further close below the 1.08128 touching swing low D as shown should then target the 1.05627 next.
On the upside we require a close above 1.6984 August 24th resistance to turn medium term outlook again.