Thursday, June 17, 2010

Updated EUR/USD Long Term View

It has been almost a month since my last post. It is good to be back. While the business of trading continues, my time has been limited for posts due to vacation, illness, endurance training, house remodels, and other business ventures.

Needless to say, I have been a tad overbooked.

The market has been anything but unexciting during the past month. Before I get back into the shorter time periods, my longer term analysis is in need of a refresher.

Take a gander at the longer term view I posted back in March of this year.

The counts I described are all well intact, and with the latest month worth of price action, a count has moved into the forefront as most likely, that we are in an ABC correction down from early 2008 highs.

Because we have broken through below the end of wave A at 1.2328 it is entirely possible that the entire ABC correction is complete and that we are about to embark on a new bull market that will carry us to new highs. It is possible, but I do not believe it is the most probable scenario just yet.

The shorter term counts favor at least another dip to a low before bottoming, and the rally action over the last week or so looks corrective in nature... certainly persistant, but not impulsive. And we are still within the area of the previous 4th wave, a very common retracement area. No impulse means it is most likely corrective, and probably a 4th wave of the entire move down from last November highs. 

Additionally, notice the parallel trend lines (green) built off the highs of 2008 and late last year in the chart below. There is a cluster of support created by where this lower trendline crosses 61.8% retracement of the previous 5 wave rally to 2008 (1.1205), and the 78.6% fib fan from the previous 5 wave move intersects. This is an area that acted as support back in 1997-98 during a bear market. The other area I am watching is the low of late 2005 at 1.1659. Also important right in the middle of this price area is the point at which C equals A, 1.1434. There is a common equality relationship between the A and C waves in a correction, especially in a zig zag formation.

So, my target for wave C to end is between 1.1205 and 1.1659, with an emphasis on the area around the equality measure of 1.1434.

The alternate count is very, very bearish. If it is indeed the true count, the Euro is in for a very rough ride ahead, and may not survive the fall. This is the count that Prechter believes is in play. I am not quote ready to get that bearish yet. We'll explore that option in more detail if we cross below the previously cited major support areas.

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