The extent of the decline from 1.6039 makes it unlikely that 1.5611 will hold. Expect a bounce from current levels, perhaps a spike through 1.5750 next week in order to complete a small c wave before 1.5611 is put to the test. A break below there would bring an end to the series of higher lows and puts bears firmly in control.
The EURUSD remains in the range that has held since late April. We view the correction as wave 4 within the advance from 1.1640. Wave V will take the EURUSD higher, maybe even above 1.70, but we have yet to determine if wave 4 is over. Previously, we’ve stated that wave 4 was over at 1.5468 (as a triangle) but the decline from 1.6039 has us seriously doubting that count. Instead, wave IV could be unfolding as a flat; which would not end until below 1.5283.
The support line that extends as far back as 2002 comes into play in the mid 1.40s; which intersects with the November 2007-December 2008 congestion area.
IF a flat is unfolding instead of a triangle in wave IV, then the rally to 1.6039 wave B of the flat. As mentioned, wave C would be underway now. A big reason for flipping to a bearish bias rather than staying bullish is the extent of the drop from 1.6039. The decline from 1.5944 far exceeds the length of 1.6039-1.5783, making it likely that bears have taken control. Taking out 1.5611 would bring an end to the series of higher lows and bolster the bearish case. A push through 1.5750 is possible near term. We’ll publish resistance levels in next week’s technicals.