As we have said several times in last week’s reports, signs show that the possibility of a rising correction to correct the fall from June 3rd top 89.09 to July 16th low 86.25 is growing. On the top of these signs: the inverted hammer formation, which appeared on the daily chart, and the completed 5-wave move, and further more what looks to be the corrective waves (a) & (b) forming in an ideal manner (please refer to the attached chart), and wave (c) developing in an ideal fashion. Therefore, and even though we are negative about this pair on the medium term, we should not neglect these signs which force themselves upon us for today! Short term support is at 86.81, and if broken, the price will resume its drop after a 3-wave correction, targeting 85.84 & 84.81. Resistance is at 87.37. A break here indicates that the odds of c continuation of the correction of the 5 waves down from 92.87 are still massive. This will target 88.01, then 88.78. It is worth mentioning that breaking wave 5 bottom 86.25 even with a few pips would strongly indicate the termination of the correction we are currently living, and will officially announce a new wave down!

Support:

• 86.81: obvious hourly support, which has been tested several times during the Asian session.

• 85.84: Nov 30th 2009 low.

• 84.81: Nov 27th 2009 low, and the low of the last 15 years!

Resistance:

• 87.37: short term 61.8% Fibonacci level.

• 88.01: Fibonacci 61.8% for the drop from 89.09.

• 88.78: Fibonacci 38.2% level for the whole drop from 92.87 (the 5 waves down).