Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
3 Different EUR/USD Elliott Wave Counts Point to 150 Pip Bounce

3 Different EUR/USD Elliott Wave Counts Point to 150 Pip Bounce

Jeremy Wagner, CEWA-M, Head of Education

Share:

Talking Points

-3 different wave counts suggest a bounce of at least 150 pips

-A break below 1.0800 likely accelerates to below 1.05

-Look for short opportunities below 1.0800 or bounces to 1.1050-1.1300

Earlier today, the Fed released their statement regarding their monetary policy outlook and it created a knee jerk reaction in forex towards buying US Dollars. The subsequent move in the EUR/USD stopped at an important inflection point which could open the door to a counter trend rally higher. Though EUR/USD liquidity is typically thinner through the US afternoon session, we will get a better sense of any potential follow through Thursday morning when London arrives.

In this article, we will look at the EURUSD technical picture through the lens of Elliott Wave. In a moment, we’ll share a preferred wave count and a couple of alternatives. We never know for sure what the wave count is until the waves are finished. Therefore, we need to bring a probabilistic approach in what is likely to happen based on the patterns.

The patterns we’re looking at suggests a higher likelihood that the EURUSD finds support in the 1.0850-1.0900 price zone. That may lead to a rally of at least 150 pips.

The preferred Elliott Wave count we are considering is that today’s low is the end of the 1st wave of a medium term sell off. We can see this October 15 to October 28 sell off subdivide into 5 waves. Once we anticipate the end of wave 4 (which occurred this morning), we can estimate the termination point of the 5th and final wave of that sequence.

Circle wave 5 = circle wave 1 = 1.0910

Circle wave 5 = .382 * circle wave 1 through 3 = 1.0907

As you can see, this created a tight cluster around 1.0900.

Additionally, one alternate count that we’re watching (not shown) is that today’s low is actually circle wave 3. Alternating waves typically have a Fibonacci or equality relationship. In this case, circle wave 3 would be equal to 2.618 * circle wave 1 near 1.0903.

Lastly, secondary alternate count is that this October 15 to October 28 sell off would be the alternative wave to the August 24 to September 3 sell off (not shown). Alternating waves often times have an equality measurement which means the second sell off (October) would equal the first (August – September) in distance near 1.0867.

Suggested Reading: How to Use Alternating Waves in a Forex Strategy

Conclusion

Bottom line, between 1.08-1.09, there is a high likelihood of a bounce forming in the EUR-USD that could spring higher to 1.1050-1.1300. A break below 1.0800 would alleviate pressure on this bounce and likely continue to below 1.05.

Though a bounce may develop, the trend is still down so we will use the bounce to short at higher price levels.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

Do you know the biggest mistake traders make? More importantly, do you know how to overcome the biggest mistake? Read page 8 of the Traits of Successful Traders Guide to find out [free registration required].

To receive additional articles from Jeremy via email, join Jeremy’s distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES