FXStreet (Bali) - John Normand and Niall O'Connor, FX Strategists at JP Morgan, note that the breakdown below t1.35/1.3477 support in EUR/USD affirmed the deteriorating medium term framework and risk for additional downside.
"The decline from the May and July highs and violation of key support levels suggest the medium term bearish risks are back on track. The violation of the 1.3503/1.3477 support zone which included the February/year-to-date low has been the key development for EUR/USD over the past few weeks."
"Importantly, this breakdown has affirmed the developing downtrend and deteriorating medium term framework. In turn, the key focus is on the 1.3295/50 support zone which includes the November ’13 low and the 38.2% retracement of the rally from the 2012 cycle low."
"While some pause can develop from here in line with the current oversold setup, the renewed trending bias implies corrective retracements should be used as selling opportunities. Short term bounces should find initial resistance in the 1.3475/1.3540 zone which includes the 38.2% retracement of the decline from the July peak, as well as the mid-July breakdown zone. This area should maintain the short term downside risk for an eventual break of the 1.3295/50 support zone."
"Deeper targets enter at the 1.3104/1.3045 area. Note this area includes the September ’13 low and 76.4% retracement of the rally from the July ’13 low and where the decline should attempt a more sustained consolidation phase."