The most bearish count for the EURUSD implies that the decline will accelerate with 1.5673 remaining intact.
We presented the longer term count yesterday and wrote that “our best longer term count treats the decline from 1.5904 as wave 4 (within the 5 wave advance from 1.2865) of III (within the 5 wave advance from 1.1638). Typically, 4th waves retrace about 38.2% of wave 3 of the same degree; that would place the EURUSD near 1.4894. Another common occurrence is for price to come back to the center of the triangle that the break occurred from. That places the EURUSD near 1.4650 (very close to the 50% at 1.4582).” The near term picture confirms our long term count. That is, 5 waves down are complete and a 3 wave correction may also be complete at 1.5673 (area of former 4th wave), which is shown above. Still, the count is bearish as long as price is below 1.5895.
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STRATEGY: Bearish, against 1.5895, target will be in 1.46-1.49 zone
An A-B-C correction should come to an end within the next few weeks. Wave C is viewed as underway from 98.56. Wave C would equal wave A at 103.88, very close to the former 4th wave extreme at 103.58. Near term, support should come in near 101.50. The move up is extended, therefore we view this is an optimal time for short term longs to exit.
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STRATEGY: Exit longs
The GBPUSD bearish pattern has remained intact. “Bigger picture, we view the decline from 2.1160 as wave (A) in a larger A-B-C correction. Wave (B) was a clear 3 wave countertrend rally that ended just shy of the 61.8% level of A. Wave (C) is underway now and specifically, wave 1 of (C) is underway now. The longer term (8 to 12 weeks) target is near 1.8500.” As long as price is below 2.0191, we maintain that large wave C is underway from 2.0396. Near term, potential resistance is at 1.9965 but given the wave structure, the decline could accelerate.
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STRATEGY: Bearish, against 2.0191, target TBD
Expectations are for the rally from .9647 to eventually reach the 1.0730-1.1121 zone. Also like the EURUSD, the rally from .9647 is probably a series of 1st and 2nd waves. Under this count, the rally from .9868 is wave iii of 3 of A. The structure is very bullish as long as price is above .9871
STRATEGY: Bullish, against .9871, target TBD
“What was previously our alternate count is now preferred. The drop to .9710 completed an expanded flat from the December high at 1.0248. It is highly probably now that a multi-year low is in place at .9055. Objectives for the bull move that began at .9710 are near 1.09 and 1.1600.” Near term, we expect price to drop to at least 1.0093. This would present a bullish opportunity.
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Our confidence in the bearish count that we proposed a few weeks ago has grown. “We view the rally from .6639 to .8215 as a large expanded flat (A-B-C). Wave C of that rally is an ending diagonal (waves 1-2-3-4-5 are overlapping and each subdivide into 3 waves). Bigger picture, .8215 may be the end of wave B from .5927. Price is expected to eventually come under .5927.” Near term, the drop below .7865 confirms (with a high probability) that a 3rd of a 3rd wave is underway from .8215. Risk on shorts can be moved to .8101.
STRATEGY: Bearish, against .8101, target TBD
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[1] STRATEGY is a summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughout the week; these are published at separate articles at DailyFX.
