Although the single currency fell to as low as 0.8403 (just missed our downside target at 0.8400), lack of follow through selling and the subsequent rebound suggest the fall from 0.8857 has ended at 0.8403, hence consolidation above this level is seen with mild upside bias for gain to 0.8630 (50% Fibonacci retracement of 0.8857-0.8403) but a daily close above resistance at 0.8646 is needed to add credence to this view

EUR/GBP – 0.8581

EUR/GBP – The major (A)(B)(C)-(X)-(A)(B)(C) correction from 0.9805 is unfolding and 2nd (A) has possibly ended at 0.6936.

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Although the single currency fell to as low as 0.8403 (just missed our downside target at 0.8400), lack of follow through selling and the subsequent rebound suggest the fall from 0.8857 has ended at 0.8403, hence consolidation above this level is seen with mild upside bias for gain to 0.8630 (50% Fibonacci retracement of 0.8857-0.8403) but a daily close above resistance at 0.8646 is needed to add credence to this view and encourage for further gain to 0.8680-85 (61.8% Fibonacci retracement). Having said that, as broad outlook remains consolidative, reckon upside would be limited to 0.8750-60 and price should falter well below said resistance at 0.8857.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major from there has possibly ended at 0.8067 as A-B-C-X-A-B-C. We are keeping our view that the entire correction from 0.9805 has possibly ended at 0.7756 and as labeled as the attached daily chart and impulsive move from 0.9084 has ended at 0.7756 as a 5-waver which marked either the (C) wave or the A leg of (C), a daily close above resistance at 0.8831 would suggest (C) leg has ended and headway towards 0.9084.

On the downside, whilst pullback to 0.8510-15 cannot be ruled out, reckon 0.8495 (previous resistance) should hold and bring another rebound later. Below 0.8422 support would abort and signal the rebound from 0.8403 has ended, bring another test of this level, once this support is penetrated, this would signal the fall from 0.8857 is still in progress and may extend weakness to 0.8350, a sustained breach below there would suggest the rebound from 0.8304 has ended at 0.8857 (tentatively wave b top), then further fall towards said support at 0.8304 which is likely to hold on first testing.

Recommendation: Buy at 0.8515 for 0.8680 with stop below 0.8415.

Euro’s long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.

We are keeping an alternate count that only wave III ended at 0.9805 and the correction from there is the wave IV and may extend weakness to 0.7700, however, it is necessary to see a daily close above resistance at 0.9143 would change this to be the preferred count.

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