EUR/USD is trading nicely lower for the last week or so which could be start of a new larger impulsive bearish trend. However, decline from 1.3450 is actually still in three waves so corrective outlook must not be ignored but we will stay with current sentiment and focus on the bearish scenario as long as 1.3400 holds. Ideally market is now in the middle of an impulsive wave 3, and broken support channel line is important evidence for this count, because this breakout usually causes an acceleration that makes wave three the longest and sharpest wave. Downside projections for wave 3 are at 1.3130 and 1.3040.

On a daily chart we can see that EUR/USD has been in uptrend mode almost all summer from 1.2750, but recovery has a corrective look. With that said, we think that move is complex correction, probably a flat and that larger trend will continue lower, especially if we consider a five wave decline from 1.3700 at the start of the year. Keep in mind that impulses show direction of a larger trend, which in our case it means down. If we are correct then latest bullish leg represents wave C) of a three wave pull-back that is already showing some evidences of a top at 1.3450. We however still need a larger impulsive weakness towards 1.3000 to confirm the end point of wave (2). If pair can do that, then EUR/USD will be ready for a sharp fall in the rest of the year, probably to 1.2500 if not lower.