EURUSD targeting 1.26

I hope all of you had a Merry Christmas and a fantastic New Year’s eve celebrations. I will you all health (paramount), lots of luck and profits in 2012.

Now, back to business:  EURUSD is selling off. See news here and here. Hungary is also blowing up btw.

This is a longer term chart of EURUSD. You can see that Major Up Trendline  (middle blue line) was broken in September 07 and retested in October 26^th . I subsequently drew another Major Up Trendline connecting June 03 2010 bottom to October 03 2011 bottom. Following a fake break on October 24^th, this trendline was decisively broken on December 11 as well. I am repeating the obvious but the Primary Trend is down and the rallies should be sold.

Green horizontal lines are Fib retracements:  61.8% retracement at 1.3046 is left behind but on January 2^nd it was re-tested and successfully rejected.  The next Fib support level is 78.6% at 1.2535. The blue horizontal lines with EURUSD levels on them are support areas based on 2010 and early 2011 weekly swing lows. The next support area comes at 1.2609 which is over 70 pips above 78.6% Fib retracement. In short, you can see that we have an air pocket between now and 1.26. If EURUSD closes today below 1.29, then we should be aiming at 1.26.

The only fly in the ointment is non-confirming RSI which at this point I am willing to ignore. Like in Sep to Oct 2010, it is closely hugging 30 level which for all intents and purposes says we are in a downtrend.

There is another analysis I liked on Zerohedge. According to it, on balance we are likely to see a bounce before plunge.