If you look at my last post about EUR/USD, you can see that I favored the collapse scenario for the EURO. We certainly got a nice swoon! My target on this trade has been 1.27 for a while, and since we got that price today, I decided to take profits and sit out for at least a couple weeks. I believe we could see additional downside, but 2,300 pips in 6 months is fine for me.
On the daily chart above, notice that price easily pierced the weekly trendline dating back to 2002! I believe that the congestion around 1.35 was where all the buying pressure from that trendline was absorbed. Once the buying power was absorbed, there was nothing to hold up the EUR when it actually reached the line, and it was able to easily collapse (probably tricking many a retail trader who bought there for an ‘easy profit’).
Regardless, if the EUR/USD bounces from here, it appears that there could be one more wave down to follow. I would love to see price break through the 2008/09 lows before starting a sustained uptrend, just to create the bearish sentiment required for an uptrend.