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EUR/USD Elliott Wave Analysis

EUR/USD – 1.1913

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 extended recent upmove to as high as 1.2070 last week, the subsequent retreat from there suggests 1-2 weeks of consolidation below this level would be seen and pullback to 1.1800, then 1.1770 cannot be ruled out, however, reckon downside would be limited to 1.1740 and support at 1.1662  should remain intact, bring another rise later. Only a drop below this support would signal a temporary top (wave iii peak) was formed at 1.2070, bring retracement of recent upmove to 1.1613 support, then towards 1.1550-60 but near term oversold condition should limit downside to 1.1475-80, bring rebound later.

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 1.1900-10 cannot be ruled out, reckon resistance at 1.1980 (Friday’s high) would cap upside and bring another leg of corrective fall to aforesaid retracement targets. A daily close above 1.1980 would bring test of 1.2000, break there would signal the pullback from 1.2070 has ended, bring retest of this level, break there would signal medium term upmove has once again resumed and extend headway to 1.2100, having said that, as this move is viewed as the final leg of recent wave 4, reckon upside would be limited and price should falter well below 1.2220-30]. 

Recommendation: Exit long entered at 1.1850 and stand aside for this week.

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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