The Spanish IBEX has a very strong correlation with EURUSD and we always use this Index as a proxy to gauge the direction of the next move in EURUSD currency pair. IBEX formed a peak @ 8752 on 1.28.2013 and made a sharp 5 wave decline.
That was enough reason for us to get cautious on EURUSD and we knew a top was just around the corner. EURUSD formed a peak 4 days later on 2.1.2013 and has been trading lower since then. IBEX decline from secondary peak (8675) is incomplete and is in need of 2 more lows which means there should be more downside in EURUSD too toward 1.2600 and may be even 1.2500 region.
Shorter cycles in IBEX are calling for a corrective bounce before more downside which could result in a recovery in EURUSD toward 1.2900 before further weakness is seen.
