EUR/USD – 1.1798
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.
The single currency dropped last week on dollar’s broad-based rebound and the pair fell to as low as 1.1730 late last week, suggesting top has possibly been formed at 1.1961, hence consolidation below this level would be seen and below said support at 1.1730 would bring test of support at 1.1713, a break there would suggest the rebound from 1.1554 has ended at 1.1961, bring further fall to 1.1660-65, then towards 1.1620-25 but said support at 1.1554 should remain intact. .
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 initial recovery to 1.1845-50 cannot be ruled out, reckon upside would be limited to 1.1875-80 and bring another decline later. Only above 1.1940 would revive bullishness and signal the retreat from 1.1961 has ended, bring retest of said resistance, break there would extend the rise from 1.1554 to 1.2000. Looking ahead, only a break above resistance at 1.2035 would retain bullishness and signal early upmove has resumed for retest of 1.2093 first. A break of this resistance would confirm resumption of recent upmove from 1.0340 low for headway to 1.2150-55 (61.8% projection of 1.1119-1.1910 measuring from 1.1662), then 1.2200-10
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.