EUR/USD – 1.0521

EUR/USD: Wave (c) of 2 ended at 1.3993 and wave 3 of III has commenced for weakness to 1.0411 (1.236 of wave 1), then 1.0000.

Although the single currency rebounded quite strongly after marginal fall to 1.0340 and consolidation above this level would be seen initially, as long as resistance at 1.0654 holds, mild downside bias remains for another decline, below said support at 1.0340 would add credence to our view that medium term downtrend has resumed and extend weakness to 1.0320-25 (100% projection of 1.0873-1.0525 measuring from 1.0670), then 1.0225-30 (1.618 times projection of 1.1616-1.0912 measuring from 1.0366), however, reckon 1.0150 would limit downside, price should stay well above psychological support at 1.0000, bring rebound later.

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Our preferred count on the daily chart remains that a wave (II) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145. The decline from there is a 5-waver (C) with minor wave (i) of I of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) ended at 1.1876, this is also the low of wave I of (C) and wave II ended at 1.4940, hence wave III is now in progress with a diagonal wave 1 ended at 1.2042, the breach of previous support at 1.1876 (wave I trough) adds credence to our view that the wave 2 has ended at 1.3993, wave 3 has commenced for further weakness to 1.0411, then towards 1.0000.

On the upside, whilst recovery to 1.0550 cannot be ruled out, reckon upside would be limited to 1.0600 and price should falter below resistance at 1.0654, bring another decline later. A daily close above this level would defer and suggest a temporary low is possibly formed, bring rebound to 1.0740-50 but upside should be limited to 1.0800 and price should falter well below indicated resistance at 1.0873, bring another decline next month.

Recommendation: Hold short entered at 1.0600 for 1.0400 with stop above 1.0655.

Euro’s long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a reversal has taken place with (I) leg ended at 1.2329 and once (II) ended at 1.5145, wave (III) itself is an extended move with I: 1.1876 and complex wave II ended at 1.4902, wave III has commenced with wave 1 and 2 ended at 1.2042 and 1.3993 respectively, wave 3 of III is now unfolding for weakness towards parity.

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