EURUSD: Buyers, Beware

It seems that the euro had a bit of a fight left in it, as price rallied for nearly 300 pips, making a new high in the process.

Nonetheless, this may not be the right time to turn fully bullish. For one thing, the pattern we’re currently tracking, which is a contracting triangle, is characterized by converging trend lines, so price isn’t expected to move much higher, if at all. And for another, there’s a bearish divergence between price and momentum, which indicates that the upwards potential should be limited.

We’re updating our counts to reflect the most recent price action and to present tighter targets and invalidation points.

Weekly Main Count

– Invalidation Point: 1.1714 – 1.0516
– Confirmation Point: 1.1143
– Downwards Target: 1.0980 – 1.0697
– Wave number: Minor D
– Wave structure: Corrective
– Wave pattern: Zigzag

Big Picture

The bigger picture sees that the euro is moving towards the downside in cycle wave x, which is forming a double zigzag labeled primary waves W, X and Y.

Primary wave Y is forming a zigzag labeled intermediate waves (A), (B) and (C).

Intermediate wave (A) formed an impulse labeled minor waves 1 through 5.

Intermediate wave (B) is forming a contracting triangle labeled minor waves A through E.

Within it, minor wave A formed a double zigzag labeled minute waves w, x and y.

Minor wave B formed a zigzag labeled minute waves a, b and c.

Main Weekly Wave Count

This main count sees that minor wave C formed a double zigzag labeled minute waves w, x and y, and it’s either complete (which is more likely) or near completion.

Within it, minute wave y formed a zigzag labeled minuette waves (a), (b) and (c).

Within it, minuette wave (b) formed a running flat labeled subminuette waves a, b and c.

This count expects the euro to be moving towards the downside in minor wave D. This will be confirmed by movement below 1.1143.

The MACD indicator supports this count by showing a bearish divergence, indicating that momentum is waning and that the recent price high may not have enough steam to sustain it for much longer.

At 1.0980 minor wave D would reach 38.2% the length of minor wave B, then at 1.0697 it would reach 61.8% of its length.

This wave count is invalidated by movement above 1.1714 as minor wave C may not move beyond the start of minor wave B. It’s also invalidated by movement below 1.0516 as minor wave D may not move beyond the start of minor wave C.