Above is a weekly EUR/USD chart – I have outlined a potential bullish scenario but some conditions have to be met in order to confirm the theory:

  • Looked like we had a rejection on the weekly candle last week
  • We now struggle at the 50% Fib retracement that is acting as resistance
  • On the downside, we failed to reach the 1.27% extension and 61.8% retracement
  • A move weekly close higher could confirm the bullish sentiment
  • Right now we may be at an ABC correction after the 5 wave Elliott pattern from 1.0340 to 1.2555. If this is the case we could be in for a correction higher

The daily chart contradicts the view on the weekly:

  • The daily chart has turned higher but in recent days the USD has resumed control
  • A firm break of 1.1545 is the confirmation needed to back the weekly Elliot Wave theory
  • We are in a phase of lower lows and lower highs
  • This extension lower stopped nicely at 1.12 area which is also the 61.8% retracement level
  • There is also a resistance at the trendline running from the start of 2017 to the last wave low
  • A break past the 1.1550 would confirm the move higher but it may be resisted

All in all, there is some traffic in the way but the risk/reward looks attractive. I must stress the conditions have to be met before the outlook changes to bullish. Each time the sentiment looks like it’s about to change another wave of USD buying comes in so keep risk tight.

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