Mondays break of 1.2460 provided the week's buy signal and confirmed the forecast for a low probability of selling in EURUSD continuing beyond 5 week's.Analysis also relied on signs of slowing bearish momentum warning that selling interest was becoming exhausted. Both signals have now proved correct and with yesterday’s rally prices have reached close to the first target at 1.2555, a recovery of 50% of the last 550 pip sell off ( 1.2825 – 1.2289). Going into today positive intraday sentiment is overstretched, however with bullish momentum levels increasing, and a developing trend of buying dips, investors enthusiasm remains strong. Against this background the forecast is for a continued improvement through the 50% recovery at 1.2555 to retest last week's top at 1.2625 then 1.2668.
Risk to this forecast would be selling back through yesterday afternoons European low at 1.2477. This should be a bearish signal that sentiment is correcting from overbought extremes and more losses are likely to 1.2424 or at most Mondays bottom at 1.2386