EURUSD once again broke to a new high as expected after recent pull-back to 1.3413 low. Current rally is quite sharp so we may see an extensions even up to 1.3560 in the next few sessions; towards 200% extension of wave (iv) pull-back. The possibility exists that recent pull-back was also wave ii) in such case we should be aware of strong euro gains which actually should not be a surprise as we still expect sharp break lower on USD index (scroll down) and will be supportive for the EURUSD.
A sharp reversal back below 1.3413 would be indication of a temporary top on EURUSD.
EURGBP Is Up More Than 5% Since Start Of the Year, But Structure Is Calling For More
EURGBP is trading sharply higher, now already up around 5.8% since start of January and it seems that current bullish trend will not end anytime soon. This traders, is the nice example of an impulsive pattern in action. We are tracking red wave 3) which is a five wave pattern; now with sub-wave 5 in progress which still has a room for a 0.8650 or even 0.8700 before we may get a larger, but still only a corrective retracement.
AUDUSD Could Make A Corrective Bounce Back to 1.0465 Before Turns Bearish Again
AUDUSD reversed nicely lower yesterday and already made a new swing low, which means that pair has now five wave down from 1.0600 high, called an impulsive wave. In Elliott wave theory impulses show direction of a current trend. As such, we are ready for more aussie weakness but could see a corrective retracement back to 1.0465 before downtrend resumes. There is a Fibo zone around 1.0370 and December low just beneath it that could cause a bounce.
EURUSD: New Pull-back Could Be A New Long Opportunity
EURUSD is trading nicely higher since we called end of a wave ii) pull-back at 1.3413. Notice that market moved higher in five waves from that swing low, which represents impulsive wave iii) of a larger five wave rally. As such, we favour more upside on EURUSD, even towards 1.3700 but before that be aware of a corrective wave iv) retracement back to 1.3550. Larger trend however remains up as long as 1.3480 is not breached, therefore trader should stick with longs.
If you are wondering why 1.3480 level is important; its because wave four must not make an overlap with wave one, otherwise Elliott Wave rule of impulse would be violated and new, different wave count should then be considered.
EURUSD Gains Slowed Down At 1.3700, But Only Temporary
EURUSD has extended its gains on Friday but then stopped at 138.2% Fibonacci extension level of wave i) measured from wave ii) low. In fact, pair found resistance after five waves up from 1.3414 so actually corrective retracement should not be a surprise as we expect a pull-back of a red wave iv). With that said, keep in mind that pull-back will be only temporary at may find a base around 1.3550/80 zone.
Only a break beneath 1.3480 would invalidate the wave count and suggests that EURUSD is ready for a sizeable decline.
24 hours back we were still observing bullish counts on EURUSD, but sharp fall invalidate it, which means that something is changing. Notice that pair reversed from its highs clearly in impulsive fashion through the channel support line of the latest bullish run, connected from 1.3262. Pair closed well bellow that trend-line which is important evidence for a temporary change in trend. As such, we need to respect this price action and immediately re-adjust the wave counts. Current structure suggests that EURUSD will make a minimum three wave decline from 1.3710, because this is the minimum structure of a corrective price action. Ideally we will see a simple zig-zag, labeled as an A-B-C move. Currently, price is still falling within wave A so we will see more sideways and bearish price action beneath 1.3400 and possibly to 1.3315 triangle pivot level after a wave B pull-back which will probably unfold ahead of the ECB rates decision on Thursday.
USD Index Is Bullish For the Near-term Which Will Keep the EURUSD Bellow 1.3710
USD Index has recovered very sharply from below 79.00 level. Recovery was impulsive so we need to respect this type of a price action, that’s why we turned bullish on the USD for a few days. Always when market will make just a corrective pull-back you need to remember that structure still needs to be made in three waves. If we look on our chart then we can clearly see that rise from the low is actually only in one completed leg; that’s wave (a), so be aware of more upside in this week. Ideally market is forming an (a)-(b)-(c) retracement, called a zig-zag towards 80.15-80.50 region. At that zone you will also notice a trend-line connected from November 16 which could react as a resistance if tested of-course.
For the very near-term we could see deeper levels in wave (b) with possible test of 79.40 region before wave (c) breaks higher. With higher near-term prediction for the USD be aware of more weakness on EURUSD.
Intra-day Review For USDCHF and EURUSD (Elliott Wave)
Markets did not move much during the Asian trading hours, despite lower stock prices that followed bearish price action seen yesterday on European and US shares.
The EURUSD was mostly flat around 1.3500 level but pair has now turned bullish ahead of the ECB. Looks like the reaction is technically based that came in from weaker USDCHF.
Notice that USDCHF made three waves up to 0.9148 but we still need to see break of a corrective channel support line and 0.9055 as well to confirm weakness towards 0.9000. Anyhow sooner or later pair will test this psychological level.
At the same time we are tracking bullish intra-day pattern on EURUSD, where we could see test of 1.3600 resistance in incomplete wave B, before pair turns bearish for wave C.
Oil: Buyers Could Wait On Deeper and Better Levels Within Bearish Correction
Oil fell down to $95 this week before turned bullish again. However, we think that latest bullish reversal is only temporary, as we are tracking an incomplete corrective decline in wave 4) that should be structured by three legs. We labeled a leading diagonal in wave A followed by a current wave B bounce towards 97.30/50 from where price could turn bearish for wave C.
If you are familiar with the Elliott Wave Theory then you will know that fourth waves can be very tricky, because there are many different patterns available, like flat, triangle, zig-zag, or maybe even combination between them. However, the most common structure on the markets is a zig-zag. A zig-zag is a three wave pattern, labeled as A-B-C that occurs against the primary trend. As such, we will focus on this structure for now, which means more downside could be seen in the next couple of days, possibly even back to $93-$94 zone; 38.2% retracement and base channel supports as shown