EUR/USD is temporarily unwinding from oversold conditions. However, it is still likely to see the bearish impulsive move is extend from key overhead resistance (primarily a 2 year trend and its long-term 200-day average).
Bearish sentiment also remains anchored by heightened contagion fears driven from the greater European sovereign debt risk.
A sustained close beneath 1.3146 (Oct swing low) will re-establish the larger downtrend from April and target 1.3000 (psychological level), then 1.2870 (2011 major low).
Keep an eye on highly correlated risk-related proxies, such as the S&P500 and AUD/USD, which both continue to exhibit downside presssures.
Inversely, the USD Index is extending its recovery higher and is fast