EUR/USD - Is the EUR short trade getting crowded?

Yes in the short term, but looking at the longer term No!

The low that we saw yesterday at 121.42 violated the channel support line, but couldn't maintain the violation, which points to the fact, that wave (iii) of 3 down is finished and we now in wave (iv). What can we expect of wave (iv)? Wave (iv) doesn't really have to do much, at least not when you think in points gained. The run we have seen towards 124.45 could be enough, but we most likely would need some more time, before being able to make the final low of wave iii down. However if 124.45 is broken to the upside, we could see a continuation higher towards the 127.37 area.

You migth ask why I expect more downside to be seen? Take a look at the RSI indicator. we have no divergence on the 14 days RSI, which tells me that this most likely is only wave (iii) of iii of 3 and we should see more downside after this correction.

Also take a look at the stochastics indicator at the bottom. Yes we are in oversold territory, but we have "only" been there for about 4 months and we have no sign of a turn rigth now. If you look at the rally from 124.52 in the first quater of 2009 the stochastics indicator went to overbought territory and stayed there for 7 months in a row before turning down. That said we don't have stay in oversold territory as long as that, but we most likely isn't done with the downside yet.