Equities are bouncing, markets are back to bargain hunting as the U.S./China trade talks continue, a...
Learning to Count Elliott Waves on Forex Pairs
08/06/2010 12:01 am EST
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.
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).
By the Staff at ActionForex.com
More Elliott Wave analysis can be found at ActionForex.com
Related Articles on FOREX
Brexit weighs on British pound, euro. Yen spikes and falls back. Bill Baruch, president and founder ...
Price revulsion for risk continues following a cold weekend. Moods are wretched with the hope for ce...
The chemical reaction of negative news headlines mixed with the usual worries about global growth, U...