3 Different EUR/USD Elliott Wave Counts Point to 150 Pip Bounce
Talking Points
–
3 different wave counts suggest a bounce of at least 150 pips
-A break below 1.0800 likely accelerates to below 1.05
–
Look for short opportunities below 1.0800 or bounces to 1.1050-1.1300
Earlier today, the
Fed released their statement
regarding their
monetary policy
outlook and it created a knee jerk reaction in forex towards buying US Dollars. The subsequent move in the
EUR/USD
stopped at an important inflection point which could open the door to a counter trend rally higher. Though
EUR
/
USD
liquidity is typically thinner through the US afternoon session, we will get a better sense of any potential follow through Thursday morning when London arrives.
In this article, we will look at the EURUSD technical picture through the lens of Elliott Wave. In a moment, we’ll share a preferred wave count and a couple of alternatives. We never know for sure what the wave count is until the waves are finished. Therefore, we need to bring a probabilistic approach in what is likely to happen based on the patterns.
The patterns we’re looking at suggests a higher likelihood that the EURUSD finds support in the 1.0850-1.0900 price zone. That may lead to a rally of at least 150 pips.
The preferred Elliott Wave count we are considering is that today’s low is the end of the 1st wave of a medium term sell off. We can see this October 15 to October 28 sell off subdivide into 5 waves. Once we anticipate the end of wave 4 (which occurred this morning), we can estimate the termination point of the 5th and final wave of that sequence.
Circle wave 5 = circle wave 1 = 1.0910
Circle wave 5 = .382 * circle wave 1 through 3 = 1.0907
As you can see, this created a tight cluster around 1.0900.
Additionally, one alternate count that we’re watching (not shown) is that today’s low is actually circle wave 3. Alternating waves typically have a Fibonacci or equality relationship. In this case, circle wave 3 would be equal to 2.618 * circle wave 1 near 1.0903.
Lastly, secondary alternate count is that this October 15 to October 28 sell off would be the alternative wave to the August 24 to September 3 sell off (not shown). Alternating waves often times have an equality measurement which means the second sell off (October) would equal the first (August – September) in distance near 1.0867.
Suggested Reading:
How to Use Alternating Waves in a Forex Strategy
Conclusion
Bottom line, between 1.08-1.09, there is a high likelihood of a bounce forming in the EUR-USD that could spring higher to 1.1050-1.1300. A break below 1.0800 would alleviate pressure on this bounce and likely continue to below 1.05.
Though a bounce may develop, the trend is still down so we will use the bounce to short at higher price levels.
—Written by Jeremy Wagner, Head Trading Instructor, EDU
Follow me on Twitter at
@JWagnerFXTrader
.
See Jeremy’s recent articles at his
Bio Page
.
Do you know the biggest mistake traders make? More importantly, do you know how to overcome the biggest mistake? Read page 8 of the
Traits of Successful Traders Guide
to find out [free registration required].
To receive additional articles from Jeremy via email, join Jeremy’s
distribution list.
