On the Weekly chart we are inside a downtrend channel, where price has been rejected at its channel resistance for the third time, after two successful rejections, supporting our view for a reversed H&S or Double Bottom before continuing higher.
We also keep in mind two other factors strengthening our bearish mid-term outlook:
The 1.2087-1.3138 wave still is in a corrective stage to the downside (correction is not finished) and the range's 1.2608 support overlaps with Fibo 50.0 of 1.2087-1.3138 making this one of the most probable turning points for the EUR/USD in the near future, even though the price can certainly move lower and perhaps form a Double Bottom near Fibo 38.2-23.6 of the measured wave.
We turn our view to the Daily chart now, to see our position in accordance to the Weekly chart.
We can see the downtrend channel in more detail here and locate our short setup, with a good risk/reward ratio.
Price has currently been rejected at the downtrend channel's resistance and 1.3018 resistance area
(also check H4 to see rejection candles).This will probably confirm the channel's resistance as a strong,significant trendline.
The correction of the 1.2087-1.3138 wave is safe to continue now, giving us a good chance for the short setup we've prepared.
The best entry on the Daily timeframe was achieved after the first red candle below the channel with stop loss slightly above the channel and a target near the next significant support level (1.2669).
Another short position opportunity is forming now on the Daily chart as price has retraced higher and is nearing the downtrend channel resistance once again.
One other reason to short the EUR/USD is that it is well corelated to GOLD now, wich has formed a Triple Top on the Daily chart and has already dropped significantly.