2 Elliott Wave Pattern Possibilities on EUR/USD
When the Federal Reserve raised its key interest rate this month, traders rushed in to play the differential of interest rates on EUR/USD. Looking at the Elliott Wave picture for EUR/USD, the two favored Elliott Wave patterns suggest a medium term sell-off in the coming weeks.
We cannot say for sure which of these patterns is the stronger one, but we do have some key levels to watch.
Below 1.0520, we can keep an eye on a move towards 1.01. Above 1.0650 and the higher probability pattern shifts towards 1.0720-1.0950 where we can target another move lower.
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Extended Wave 3 Lower
This pattern suggests we are in wave iii of 3 lower that reaches 1.01 and possibly lower. This is the more aggressive pattern and remains possible so long as we trade below the November-December 2016 trend line (currently crossing near 1.0650). Trade above the December 11 low of 1.0520 weakens this wave picture and may be an early warning signal of a move above 1.0650.
EUR/USD Extended Wave 3
Expanded Flat Upward Correction
The low on December 20 pressed the outer boundaries of a ‘B’ wave of an expanded flat correction. Under this pattern’s interpretation, the ‘C’ wave would work higher in motive fashion as an ending wave. This pattern would then be completed to the upside with targets near 1.0720, 1.09 and 1.0950. A break above 1.0650 would warn to hold off on re-entering short until wave ‘C’ fully develops towards one of targets.
EUR/USD Expanded Flat Correction
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.