EURUSD's limited bounce means bearish tone; targets 1.2231/1.2194

Against a background of bearish signals for this week EURUSD was sold to lower levels for a 5^th day in a row, but the downside stalled above 1.2200. This profit taking rally from oversold extremes and 23-month lows was limited, however, with less than half of Friday’s decline regained and some renewed selling overnight. With these factors and the underlying negative tone in the background our call is Bearish below 1.2340.

The immediate objective is 1.2264, this week's open, with a move below that point targeting  1.2231, yesterday's low, then 1.2194, the low from July 2010.

The risk to this call is that profit taking is stronger than currently assessed. This would be confirmed by a move above 1.2340, half of Friday’s net fall, with renewed demand then focusing on 1.2403, Friday’s top, or even towards 1.2459, half of last Thursday’s decline.