EUR/USD – 1.2020
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 resumed recent rise and rose to a marginal high of 1.2093, lack of follow through buying on break of previous resistance at 1.2070 and the subsequent retreat suggest consolidation below said resistance would be seen and another test of 1.1838 support cannot be ruled out, however, a daily close below there is needed to signal a temporary top has possibly been formed, bring retracement of recent rise to 1.1770-75, then 1.1700 but previous support at 1.1662 (previous 4th of a lesser degree) should hold from here, 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, expect recovery to be limited to 1.2000 and reckon 1.2040-50 should hold, bring another retreat later. Only break of said resistance at 1.2093 would signal recent upmove from 1.0340 low is still in progress and may extend headway to 1.2150-55 (61.8% projection of 1.1119-1.1910 measuring from 1.1662), however, loss of upward momentum should prevent sharp move beyond 1.2200-10 and price should falter below 1.2255-60, risk from there remains for a much-needed correction to take place later this month.
Recommendation: 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.