- EURUSD completing 5th wave
- USDJPY approaches resistance
- GBPUSD short term head and shoulders
- USDCHF ending diagonal; resistance at 1.19
- USDCAD bullish against 1.2278
- AUDUSD head and shoulders continuation
The drop below 1.27 indicates that wave 5 (within the 5 wave drop from 1.47) is still underway. Wave 4 unfolded as a triangle and breaks from triangles are terminal. Very short term, the EURUSD is consolidating in a small 4th wave. Additional weakness is then expected in wave v of 5. There is measured support at 1.2378; which is the 161.8% extension of 1.3077-1.2719/1.2947.
As suggested recently, it is likely that either a triangle or a flat is unfolding from the December low at 87.09. I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves. The subwaves of triangles and flats are 3 wave affairs. Near term structure is bullish as long as price is above 89.68, which keeps the series of higher lows intact. 91.12 is potential support.
The rally from 1.35 is in just 3 waves (with the 2 up legs roughly equal... a common trait among corrections) and the decline from 1.4990 may be the next down leg in the long term bear. There is the chance that 1.4609 is the top of either a b wave or small 2nd wave within a bear cycle from 1.4990. A head and shoulders top is now visible, which favors bears as long as price is below 1.4609. 1.3775 is potential support (100% extension of 1.4990-1.4134/1.4609).
The drop from 1.2303 is an impulse (5 waves), but the drop may be the end of a decline rather than the beginning (a C wave). The decline would have completed an expanded flat at 1.0367. This level serves as the secondary low in a longer term bull cycle from .9634. The rally from 1.0367 is the beginning of the next long term bull leg. Near term, this advance is nearing completion in an ending diagonal from 1.1312. Watch the upper end of the diagonal line for resistance. The line crosses roughly 1.1880 today and increases about 22 pips per day.
As I've favored the last few weeks, the triangle that has been underway since October is probably complete at 1.2020. Price has rallied above the upper triangle line today, which warns of a break above 1.2770 and then 1.3025. The breakout scenario is favored as long as price is above 1.2278.
I am zooming out to the daily in order to highlight the long term bearish implications from the 5 wave drop and subsequent 3 wave rally (since July 2008). The corrective rally from the October 2008 low ended right at the former 4th wave, which is typical of corrections. The pattern since the October low can also be categorized as a head and shoulders continuation. Coming under the February 2 low at .6245 would mark a break of the neckline and focus would then shift to the October low of .60. Staying below .6649 favors bears.
The NZDUSD has also declined impulsively (5 waves) since its 2008 high and that decline was followed by a 3 wave rally (from the November low). The drop from .6090 is viewed as beginning of the next bear leg. Staying below .5322 favors bears.
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