Talking Points
-Elliott Wave Theory can provide clues to our location within the EURUSD trend
-EURUSD finished a proposed ending wave of an ending wave of an ending wave suggesting a multi-week low on December 8, 2014
-Initial target zone is as high as 1.2900
EUR/USD Daily Chart
(Created using FXCM’s Marketscope 2.0 charts)
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Fibonacci Wave Ratio Analysis
- 5 clear waves higher from the December 8 low suggests the shorter term trend has moved higher
- One scenario suggests an immediate thrust higher under a small wave 3 to 1.2765 (see video and scenario #1 below)
- A second scenario suggests a drop towards 1.2340-1.2370 with the movement since December 11 creating an expanded flat formation (see video and scenario #2 below)
Bottom line, look for opportunities to buy EUR/USD on a breakout higher above this morning’s high or on a dip near 1.2340-1.2370. A move below 1.2450 will begin to suggest a deeper dip is likely towards the 1.2340 area. The December 8 low is the risk level on a deeper dip.
If wave 3 unfolds, either immediately or next week, upside targets towards 1.2765 would be the initial step in a multi-week rally.
From a longer term perspective, wave 4 of the previous trend, meaning the green wave 4 often times acts like a magnet in counter trend rallies. Green wave 4 is near 1.2900 so there are a few pips available should the wave labeling be correct and a rally develop.
Suggested Reading: How to Spot and Trade a Reversal in Forex
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Good luck!
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
Follow me on Twitter at @JWagnerFXTrader .
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See Jeremy’s recent articles at his DailyFX Forex Educators Bio Page.
This article uses Fibonacci ratios to follow a pattern. To learn more about Fibonacci retracement ratios, register and take this free 20 minute on demand course. Register here.
