The bullish reversal in June initially begun with daily bullish divergence (a lower low in price-action compared to MACD's higher low). The subsequent recovery was led by a break in RSI trendline resistance and the key 14-day MA, confirming the short-term trend shift. Today's close above resistance at 1.2986 (the 61.8% retracement from the April high) suggests a move towards the key 1.3125 (38.2% retracement from the Q4 '09 high). An acceleration through this Fibonacci level, which also correlates with the DXY's (US Dollar Index) important 50% retracement at 81.43, would confirm an extended medium-term recovery. As such, US Dollar underperformance is likely to continue towards its 200-day MA and could materially boost the EUR/USD to the 1.35 region, near the 50% retracement from the Q4 '09 high. Note, however, that the MACD oscillator is diverging from current EUR/USD price-action and a loss of 14-day MA and RSI trendline supports would imply a growing risk that the short-term trend has exhausted.
