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Sep 14 2010 06:45 EDT
Stocks are trading higher at the start of the week, because of the stronger than expected industrial production in China, released during the weekend. As such, gaps appeared on Sunday and pushed the major currencies higher against the US dollar. One of the strongest currencies yesterday, besides the Swiss franc was Eur, probably because of new capital standards for European banks.
Eur/Usd gained by more than 200 pips already since Friday close, and established a recent highs just a few pips away from 1.2917 resistance. This resistance is likely to be broken this week, since we believe that the whole upward corrective structure from 1.2587 August low is still unfinished. On the 4h chart below a double zig-zag is the best idea for now, with wave B and C yet to come, before any larger reversal appears.
Keep in mind that gap from Sunday is still unfilled, but from my experiences more than 90% of gaps are getting flied already during the first session of the week, but those that remain open for two Asian sessions may stay open by the end of the week Thursday/Friday. With this being said, Euro may reach even higher levels, around 1.3000, before sell-off towards the open gap gets underway.
On the smaller time frame we can count five waves up on Eur/Usd, which means that deeper correction should follow in the near-term labelled as a black wave B. However, an alternative wave count suggests more bulls, before wave A is done, if we consider a possible flat structure of a blue wave (iv).
Disclosure: no pos.