A sharp reversal from the highs could be an early sign for a bearish trend on the EUR/USD (FOREX:EURUSD), which sooner or later will occur if we consider that rally from 1.2050 low is corrective. A decline from 1.3832 made last week looks impulsive, so based on minimum expectations EUR/USD will now move down in three legs, but ideally this is a start of a significant EUR weakness in impulsive fashion.
The reason why we are bearish on EUR/USD is also strength in the U.S. Dollar Index where prices reversed strongly to the upside last week, out of a downward channel that should be an important sign for a change in trend, even if just temporary.
Another reason for further decline on EUR/USD are U.S. Treasury Notes where prices turned bearish last week following the FOMC statement, which was just a trigger for a reversal that has been technically expected already earlier, based on Elliott Wave approach. Notice that from September low, rally on Five-Year notes can be counted in five waves with broken wedge at the top of the current rally, which is a reversal sign. Traders with Elliott Wave approach will also know that after every five waves correction follows back to the area of the former wave 4). If we are correct then U.S. notes will move lower in the next days maybe even weeks back to the former wave 4).
And how do U.S. notes help us?! Well, we see a positive correlation between the EUR and U.S. notes, so if the U.S. notes fall then the EUR/USD will probably follow.