EURUSD: New Downtrend vs. Sideways Triangle

In the wake of the Brexit vote, the official currency of the eurozone took a considerable hit against the US dollar. It began by the EURUSD losing over 500 pips of its value in a single day, breaking the 1.1000 support level, followed by a timid 50% correction that seems to be meeting strong resistance. Momentum has also turned rather bearish over the past week.

All this supports our main view that a new downtrend has begun and will continue for a long time to come, but it doesn’t negate the possibility that a very long-term triangle is still unfolding sideways. These are strange and wild times for the euro, and as always we’ll do our best to keep you one step head.

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: 1.1428
– Confirmation Point: 1.0913
– Downwards Target: 1.0909 – 1.0589
– Wave number: Minute iii
– Wave structure: Motive
– Wave pattern: Impulse

Weekly Alternate Count
– Invalidation Point: 1.1616 – 1.0913
– Confirmation Point: –
– Upwards Target: 1.1348 – 1.1587
– Wave number: Minor E
– Wave structure: Corrective
– Wave pattern: Zigzag or Double Zigzag

Big Picture

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

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

Black wave (A) formed an impulse labeled blue waves 1 through 5.

Black wave (B) formed a running flat labeled blue waves A, B and C.

Both blue waves A and B formed zigzags labeled pink waves a, b and c.

Blue wave B retraced exactly 95% of blue wave A, fulfilling all the requirements of a flat correction.

Blue wave C formed an ending diagonal labeled pink waves i through v, and failed to make a new high above that of blue wave A.

This completed black wave (B) at 1.1616.

Main Weekly Wave Count

This main count sees that black wave (C) is forming an impulse labeled blue wave 1 through 5.

Within it, blue wave 1 is forming an impulse labeled pink waves i through v.

Within it, pink wave i formed an impulse labeled green waves (i) through (v).

Pink wave ii formed a zigzag labeled green waves (a), (b) and (c), retracing 61.8% of pink wave i.

Pink wave iii is forming an impulse labeled green waves (i) through (v).

This count expects the euro to continue moving towards the downside in pink wave iii. This will be largely confirmed by movement below 1.0913.

At 1.0909 pink wave iii would reach 100% the length of pink wave i, then at 1.0589 it would reach 161.8% of its length.

This wave count is invalidated by movement above 1.1428 as green wave (ii) may move beyond the start of green wave (i).

Alternate Weekly Wave Count

This alternate count sees that the black wave (B) is forming a contracting triangle labeled blue waves A through E.

Within it, blue waves A, B, C and D formed zigzags labeled pink waves a, b and c.

Blue wave D reached a little less than 61.8% the length of blue wave B, and retraced a little more than 61.8% of blue wave C.

Blue wave E is most likely forming a zigzag labeled pink waves a, b and c.

This count expects the euro to move towards the upside in blue wave E to complete black wave (B).

At 1.1348 blue wave E would retrace 61.8% of blue wave D, then at 1.1587 it would reach 61.8% the length of blue wave C.

This wave count is invalidated by movement above 1.1616 as blue wave E of this contracting triangle may not move beyond the start of blue wave D. It’s also invalidated by movement below 1.0913 as pink wave b of this zigzag may not move beyond the start of pink wave a.