Elliott Wave counts are a great way to spot areas where short-term trends are reversing. It does take some practice, but here is how we see the counts moving in the EUR/GBP currency pair.
Despite early rise to 0.8532, the subsequent retreat from there suggests the rebound from 0.8067 (wave 3 low) has ended there (either a leg or entire wave 4) and consolidation with downside bias is seen for weakness to 0.8245 (61.8% Fibonacci retracement of 0.8067 to 0.8532), however, a daily close below 0.8190/00 is needed to signal the wave 4 is over and bring resumption of the decline in wave 5 for retest of recent low at 0.8067, otherwise, further choppy consolidation would take place.
Our latest preferred count is that the wave V of a five-wave series from 0.5682 ended at 0.9805 earlier and major A-B-C correction is unfolding with A: 0.8637, B: 0.9491, and wave C is a five-waver with 1: 0.9158, 2: 0.9418, extended wave 3 ended at 0.8576, followed by wave 4 at 0.8868. The wave 5 has ended at 0.8400; this also marks the end of larger degree wave C as well as (A).
The rebound from there to 0.9413 is the wave (B) which followed by wave (C) and the breakdown is 1: 0.8603, 2: 0.9150, wave 3 has possibly ended at 0.8067, and a leg of wave 4 correction has met indicated upside target at 0.8481 and the retreat from 0.8532 suggests A leg has ended and B leg may bring weakness to aforesaid downside target but 0.8150 should contain downside. Looking ahead, a daily close below 0.8150 would signal the wave 5 of (C) is underway and bring retest of 0.8067, then towards psychological support at 0.8000, but reckon 0.7744 (50% Fibonacci retracement of 0.5682 to 0.9805) would hold.
On the upside, expect recovery to be limited to 0.8440/50 and resistance at 0.8532 should hold. Only a break above 0.8532 would signal c leg of wave 4 is underway for stronger recovery, but price should falter below wave 1 bottom at 0.8603.
Our recommendation: Sell at 0.8450/60 for 0.8250 with stop above 0.8535.
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The euro's long-term uptrend started in February 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000), and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007), and wave V as well as wave (C) has ended at 0.9805.
Therefore, a major correction has commenced from 0.9805 and weakness to 0.8230 (38.2% Fibonacci retracement of 0.5682 to 0.9805) would be seen first, then to 0.8000, and later 0.7744 (50% Fibonacci retracement).
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By the Staff at ActionForex.com
More Elliott Wave analysis can be found at ActionForex.com
