EURUSD has broken down and will head even lower over the next two to three months, though it will probably experience a small counter-trend reversal first, according to The Capital Observer, the research service provided jointly by Diapason Currencies & Commodities UK and Management Joint Trust in Switzerland.

EURUSD has broken below its early February to mid April trading range and, based on its proprietary set of indicators, The Capital Observer sees two downtrends in operation: i) One from the early February top which can be seen in their medium-term oscillators (upper pane of Chart*) and ii) a trend from the mid-February retest which can be seen in their long term oscillators (lower pane of Chart). However, both Charts suggest support will be found at 1.18 around mid-May, at which point EURUSD may start to rebound, possibly until early June. They view this move as counter-trend and expect it to move back up to within the lower end of the previous range (towards 1.22), before it reverses again in June.

Once the 1.18 support level is broken, The Capital Observer sees a downside target of between 1.14 and 1.10, which they calculate based on a measure of historical volatility subtracted from the 1.251 range top.

See Chart.

(*Click here for an explanation of the chart).

See www.thecapitalobserver.com for further details on its research service.