Euro Rebounds... but for how long?

If you have been following these posts, you know that I have been bouncing back and forth as to whether we are an ending diagonal 5th wave, or a diagonal wave 4th option. Both are similar in form, but with the breakthrough yesterday to new lows, and what would have to be a very shollow "e" wave of the triangle, the ending diagonal view took the spotlight. The diagonal 4th is still the most likely alternative, but if we break through 1.3524 to the upside, the diagonal 4th option is completely off the table.

The selling didnt quite reach the lower blue line as I was anticipating yesterday, however, after doing some more analysis overnight, I realized that a touch of the blue line on the bottom would have eliminated the ending diagonal option completely, as wave 3 would have stretched out to be longer than wave 1 (a rule breaker in Elliott rules). The bounce that played out overnight was critical to the ending diagonal option.

Ending diagonal's are very rare and only take place where the preceding moves have gone too far, too fast. The Euro's move down from 1.51+ last November to 1.32 could be described as such a move. Even still, because of the rarity of seeing this pattern, and even more rare being able to identify it in real time before it is almost complete, I will continue to be vigilant in moving alternatives to the front and center as they become viable.

EUR/USD Breaks Through to New Low!

I was watching for a new low and now we have it, and with a nice break of both the short term (green), and long term (white) trend channel lines. And so far, I do not see signs of the downtrend diminishing. Because we have not had a significant counter-trend move that I have mentioned might take place over the last few days in what could be called a "wave e", I have lowered the probability of the diagonal 4th wave pattern that I have had as primary over the last week, and gone back to the ending diagonal 5th option from last week.

There are always alternatives in elliott wave analysis, and it is sometimes challenging to know which one is playing out in real time. From my recent post though, I hope everyone has been taking away the most important lessons I have learned while trading using elliott wave... when both the top and alternate scenarios are pointed in the same direction, you can be wrong on the exact pattern and still have winning trades.

Again today the difference matters very little for the short term. Likely more room to the downside. The next area to watch for for this round of selling to end is along the lower blue trendline, which is currently declining through 1.3120. I will be specifically watching for a crossover in the MACD, and a divergence between new price lows and RSI extremes to help judge whether the trend may be changing.

EUR/USD - "D" wave of diagonal continuing...

It appears that wave "d" of the triangle has extended (of wave iv), which was the alternate discussed in yesterday's post. Look for a bounce over the next 24 hours to start forming wave "e" of the triangle, up to between 1.3550 to 1.36. Should the selling continue below the purple trendline support without a bounce into that area, chances increase that wave iv is already over and that wave v has begun heading to new lows. Either way, the name of the game is watch for opportunities to place short positions.

Note the various trend channels I am watching on different timescales. I adjusted the green and purple slightly earlier yesterday. The blue has remained unchanged for over a month. This upper channel line has provided significant resistance. A break above would likely mean a much more significant retracement of the entire move down from last November highs.

A break below 1.328 would eliminate most remaining bullish alternatives, although even without the break these are very low in probability.

EUR/USD diagonal wave in motion...

There are a few options for the patterns lately on the short term charts, but the overall pattern has displayed 3 wave movements in either direction, which is a sign of a diagonal... the move preceding the final in a sequence.

Primary short term count favors the down trend, with an (e) wave ending this morning or with an allowance for some additional upside to make it to resistance above 1.3550 before wave (e) ends.

Alternate is still the diagonal, but had wave (d) still in progress.

Monday Morning Euro Update

From my post on Friday...
"If we are in a triangle, wave D will probably end along the white line, and probably someone in the neighborhood of 1.34, before a 3 wave bounce in a wave E."

And here's Friday's chart with trendlines...
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjUXJ7IuwC9esh40mAHKQc1MR6YCgXHqwPrd-774W2E8aAz1gnaYU5YobMUHaA0uHYGBeRhu2wHLYRyX9WpE7dNRZAhCfl1t1OFnGeatocqq0By_3k1RjrpiNXtWF9zykN9WOu4SpSVgF7/s1600/EUR45.png

The only addition I have made to this mornings chart is a new potential green channel, which at the moment, looks like it may be simply a slope change of the yellow on the way down to touch the white. The alternate is that it may be the beginning of wave "e" of a larger 4th or B wave triangle (see my post last week for details on this count). If we break through the upper green, this is how I will be viewing the action. Wave "e" could move into the 1.3550 area, which I would see as an opportunity on the short side as long as it is in 3 waves.

Adherance to trends why I love trading the spot forex market, and even more, the EUR/USD.

Iceland, Greece, now Goldman?

Fear has been back in the markets since last November, although by looking solely at the equity markets, one would hardly know it. It is only upon review of the Euro, the dollar, and other major currencies, one gets the sense that there are serious fears being acted out in the markets.

The Euro has Greece, and while the possibility of Greece's default is significant, it is much, much, much, much, much (is that too many???) more significant in what Greece may signify... a tip of the iceberg of foreign nations defaulting. Ironically, Greece has had much wider coverage in the international news, but last year, Iceland sounded the alarm. That fear alarm has driven the EUR/USD pair down significantly from it's highs up over 1.51+ to a recent low of 1.32+. That's about 13% drop in a little over 5 months! A large move in any currency.

Equities back in 2007 had Lehman Bros.... the straw that broke... well, you know how that story goes. Today's announcement about potential Goldman fraud does not surprise anyone I have talked to, but it does point to fears that so far since 2009 lows, has so far been able to be ignored. I am no expert in derivatives, or the complex financial arrangements that surround them, but I do know that noone has a solid grasp on the amount of leverage they represent in the global marketplace... and hence, the impact of a chill on these bets such that the Goldman news today may represent.

I digress though... as a non-expert on all things Goldman, and merely an Elliott wave analyst and part time trader, I will leave the deep dive into such matters to those with more experience. I point these relationships out... that between Iceland, Greece = Euro, and Goldman = Equities to merely show that fear, the everpresent necessity of a bear market, does not show its ferocity all at once, at the same time, in the same marketplace. It has peaks and valleys. This is the root of a grand supercycle bear market elliott wave. The valley of the absence of fear in the equity markets may have just passed.

Binve has a great post on elliott wave counts (short and long term) in the equity markets. I highly recommend checking his latest post out. He has had a minority view that the latest wave up (since Feb) was NOT impulsive (which I had agreed with)...

As far as EUR/USD action, the bearish triangle or ending diagonal counts of late are still in effect. No need to change things here. The short term picture appears as if a small degree 5 waver has or is near to ending, which may mean a partial retracement of the move down from the upper blue trendline.

I thought I would show the various trendlines that may be in effect that are very solid tools at finding support and resistance levels.

The white line represents the recently broken upper trend channel that has guided price action since last November highs. Yup, it has been broken (with a gap up that was just closed today), but I would keep an eye on this line as it is common for breaks to retest.

I have spoken a lot about the blue trendlines shown. These have a number of touchpoints on the upside, and will be a formidable barrier for the bulls to try to break.

The purple is a so far weak upward bound trend channel. It may provide some resistance on the way down, but given the non-impulsive nature of the rise off last months lows, it should not hold for long.

The yellow lines are very short term trend lines. The most speculative of the bunch, a break of the upper would tell us that a short term trend change is in effect.

The red line isn't a trend channel, but rather represents my line in the sand for the bearish scenarios. If my analysis is right, price will not move above this level.

If we are in a triangle, wave D will probably end along the white line, and probably someone in the neighborhood of 1.34, before a 3 wave bounce in a wave E.

Will indicators a bit oversold, and RSI diverging on the latest lows on the short term indicators, my guess is that profits have been taken for the week and we won't see much action until open on Sunday.

Have a great weekend!

Euro's got the blues.

EUR/USD declined again overnight, keepoing the bearish short term counts I have been showing on track. Most important from a technical perspective in my analysis, is that 1.3536 was taken out early this morning, negating the one bullish scenario I could come up with to explain the action off the lows of 1.326 last month (see alternate count post from Monday this week).

That clears the potentials a bit, and lends much more confidence to the likelihood of hitting new lows sooner rather than later, keeping me focused on the two bearish counts (see most recent post yesterday).

The short term picture is mixed however, with the action down from this weeks 1.369 high (touching off the blue trend channel) looking very corrective so far. I have included a micro count showing a possible impulsive wave that may be in progress, but I don't have high confidence that once this micro pattern completes, that we will head down to new lows without hitting another high above 1.369, before heading down. If we do, I continue to view this as an opportunity to go short.

With the larger patterns tipped clearly to the side of a new low in the near future, this may be one of the many cases in trading where watching and waiting may pay off with a solid entry position for the next leg down.