A larger corrective wave from 1.1990 (Jul’11 low) may be unfolding in a multi-month flat wave within a range of 1.3200 and 1.2000. The setback from 1.2970 (June high) could be a wave (Y) which could retest the 1.1990 support. A reversal above 1.2560 would refocus on the 1.2970/1.3200 resistance initially. A close below 1.2000, however, extends the bear run deeper.
The pair is holding above its October swing low at 1.2145 despite near-term USD weakness. The currency may be in a wave (B) corrective wave. Range trading may prevail while the 1.2145/1.2300 boundaries are intact. A reversal below 1.2145, however, would aim for 1.2100 ahead of strong support around 1.2000. A break above 1.2300 could extend the recovery toward tough resistance around 1.2340/1.2400.