The 1H chart shows a break below the 7/6 Asian-European session range between 1.24 and 1.2360. The break to the downside pushes the market closer to the June low near 1.2285. This threatens to continue the bear trend that started in May 2011.
In the very short-term, if there is a pullback that treats 1.2360 as resistance, we should strengthen the case for a test of the 1.2285 pivot. However, a break above 1.24 would be a reflection of risk-on trading and the EUR/USD is likely to continue a medium term consolidation so far between 1.2285 and 1.2745.
The weekly chart shows that the market is in a declining channel, and this week’s price action is indeed indicative of a bearish continuation.
If will be interesting to see if the market can break below 1.2285. That exposes the 1.20 psychological support and the 1.19 2010 low, as shown in the weekly chart below.
If we get a pullback after falling below 1.2285, 1.24 can be expected to provide resistance in the bearish continuation scenario. A break above would open up the scenario for another period of consolidation.