EUR/USD – 1.0877
EUR/USD: Wave (c) of 2 ended at 1.3993 and wave 3 of III has commenced for weakness to 1.0411 (1.236 of wave 1), then 1.0000.
The single currency finally broke above previous resistance at 1.0829, adding credence to our bullish view that the erratic rise from 1.0340 low is still in progress and upside bias remains for this move to bring retracement of early downtrend, hence further gain to 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340), then 1.1000 would be seen, however, near term overbought condition should prevent sharp move beyond latter level and reckon 1.1065-70 would limit upside and price should falter below 1.1100, bring retreat later.
Our preferred count on the daily chart remains that a wave (II) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145. The decline from there is a 5-waver (C) with minor wave (i) of I of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) ended at 1.1876, this is also the low of wave I of (C) and wave II ended at 1.4940, hence wave III is now in progress with a diagonal wave 1 ended at 1.2042, the breach of previous support at 1.1876 (wave I trough) adds credence to our view that the wave 2 has ended at 1.3993, wave 3 has commenced for further weakness to 1.0411, then towards 1.0000.
On the downside, whilst pullback to 1.0820-25 cannot be ruled out, reckon downside would be limited to support at 1.0760 and bring another rise later. A daily close below support at 1.0719 would abort and suggest top is possibly formed, bring further fall to 1.0650-60 and indicated key support at 1.0600 should hold. Only a daily close below this level would confirm top formed and signal the aforesaid rise from 1.0340 has ended, bring further fall to 1.0550, then 1.0525 support but support at 1.0493-96 would hold from here.
Recommendation: Buy at 1.0780 for 1.0980 with stop below 1.0680.
Euro’s long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a reversal has taken place with (I) leg ended at 1.2329 and once (II) ended at 1.5145, wave (III) itself is an extended move with I: 1.1876 and complex wave II ended at 1.4902, wave III has commenced with wave 1 and 2 ended at 1.2042 and 1.3993 respectively, wave 3 of III is now unfolding for weakness towards parity.
