Forex Technical Update July 8, 2010  EUR/USD in a Wave 5 Diagonal Triangle?

  • 1H: Following the EUR/USD as it rallies towards 1.2750 as posted in the previous update. The market is indeed rallyign towards 1.2740/50, however the momentum is slowing, as we see a lengthy bearish divergence forming.
  • The pattern of the rally that started near 1.21 suggests an impulse wave. In the bigger picture, this is probably a wave C in a zig-zag.
  • If this is true, we are in wave 5 and it looks like a diagonal triangle forming. These patterns are only valid in terminal waves such as wave 5, or the entire wave C. They also suggest sharp declines to follow.
  • The US session start is correcting the rally, and this may be a wave iv of 5. Then I will be stalking wave v or 5.
  • I am not expecting the market to decline past 1.26 in the US session decline, so if it does, I will have to revisit this outlook and make some adjustments.

  Fan Yang Currency Analyst Commodity Trading Advisor

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