A sharp reversal from the highs could be an early sign for a bearish trend on EURUSD which sooner or later will occur if we consider that rally from 1.2050 low is corrective. A decline from 1.3832 made last week looks impulsive so based on minimum expectations EURUSD will now move down in three legs, but ideally this is a start of a significant EUR weakness in impulsive fashion.

The reason why we are bearish on EURUSD is also USD Index where prices reversed strongly to the upside last week, out of a downward channel which should be an important sign for a change in trend, even if just temporary.

Another reason for further decline on EURUSD are US Treasury Notes where prices turned bearish last week following the FOMC statement which was just a trigger for a reversal that has been technically expected already earlier, based on Elliott Wave approach. Notice that from September low, rally on 5 Year notes can be counted in five waves with broken wedge at the top of the current rally which is a reversal sign. Traders with Elliott Wave approach will also know that after every five waves correction follows back to the area of the former wave 4). If we are correct then US notes will move lower in the next days maybe even weeks back to the former wave 4).

An how US notes help us?! Well, we see a positive correlation between the EUR and US notes so if the US notes will fall then the EURUSD will probably follow.

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