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Chart of the Day Update: Euro price action

The euro was lower in trade on Thursday and has reached our 1.4800 support area, after a five completed waves up. The whole price action shown on the chart below now looks quite tricky since the moves are trapped between a 1.5062 top and the 1.4625 lows. As such, there are two possibilities at this point; that this just in a correction of an up-trend, and the other view that this is the fresh start of a new trend. A classic question of whether this is consolidation of yearly gains, waiting to add at a better price. or distribution of positions because a fundamental reason is now in place that forces a review of fair value on the current price.

 TheLFB Charting: Eur/Usd 4 Hour Elliott Wave view

First scenario

The first possible scenario is the truncated blue wave 5). A truncated fifth wave finds the top somewhere below the previous wave 3), which means that new highs are not reached. This is also shown in our case as the market did not break through the 1.5062 wave 3) highs over the past few days. We can also count five sub-waves up in a blue wave 5), which is also valid for a truncated fifth wave formation, (wave 5 is an impulse wave and that means it need to be made by a five smaller waves).  If this scenario is the case then the market should trade lower with a five wave structure in the near-term, so that we can confirm a bearish reversal. Current highs around 1.5060 needs to then stay in place.

Second scenario

The second possible scenario is on a global market rise in valuations, and that would signal that the same blue wave 5) is not yet complete, and as such, a more complex and larger structure through the 1.5062 highs could easily happen. In this case, market has just finished a corrective pull-back of an up-trend.

Swing Point

Reduce exposure and expectancy until we get a better confirmation, it will be worth waiting for.

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