Never miss a story from Jeremy Wagner

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Jeremy Wagner

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

The Elliott Wave pricing model we have been following for EUR/USD indicates an incomplete pattern to the upside. Our previous report stated,“from a shorter term perspective, if the wave labeling is correct, then we anticipate a shallow correction back to the 1.16 handle.”

Now that prices dipped to 1.1662 on October 6, the fourth wave is maturing as expected. When this fourth wave terminates (if it has not already), we will look for a final ending wave higher to retest 1.20 and possibly 1.22.

Though EUR/USD has felt pressures from a Catalonian vote and a more hawkish Fed, the technicals are painting a picture of support to eventually emerge for the pair. The two main Elliott Wave models we are following show we are in a fourth wave. The models differ slightly on the shape, depth, and structure of the fourth wave and let us unpack those scenarios with more detail.

In the image below, the wave count on the left implies a fourth wave triangle. Under this scenario, EUR/USD is forecasted to rise modestly back towards and possibly close to 1.20 but would need to remain below 1.2092. During this modest rise, EUR/USD would also need to hold above 1.1662. This modest rise would make up the ‘d’ leg of the five wave triangle.

Two Elliott Wave Scenarios

EUR/USD Attracted to 1.20

What is interesting about the triangle scenario is notice how the ‘b’ wave stopped and reversed near the 1.618 level of the ‘a’ wave. It is common for ‘b’ waves of triangles to overshoot like this and typically, that overshot distance is contained to less than 1.618. The overlapping nature of the waves since early August also suggest a larger correction.

The image on the right illustrates a fourth wave flat pattern. It is possible to count the flat pattern as finished, though ideally a retest and break of the 1.1662 low would help the structure appear more normal. A key level we are watching for this pattern is 1.1837. So long as EUR/USD remains below this price level, then the door is open for a deeper correction and the flat pattern remains viable.

Therefore, a break above 1.1837 elevates the triangle scenario as higher probability. A break below 1.1662 elevates the fourth wave flat pattern. These are not the only two scenarios, but are the patterns that are the higher probability ones at this point.

We know from our Elliott Wave impulse studies that after the fourth wave terminates, we will look for a fifth wave higher to take shape as an impulse or diagonal pattern. There are a couple wave relationships near 1.22 so that price level could act like a magnet after the fourth wave ends.

Why do traders lose money? This could be why.

Unsure of the longer term direction of EUR and USD? Grab these quarterly forecasts.

Are you new to trading the FX market? This guide was created just for you.

---Written by Jeremy Wagner, CEWA-M

For further study on Elliott Wave impulse patterns, watch this webinar recording.

Discuss this market with Jeremy in Monday’s US Opening Bell webinar.

Other Elliott Wave forecasts by Jeremy:

Gold Prices Might Find Temporary Relief

How Much Further will Dow Jones Industrial Average Trend Continue?

Follow on twitter @JWagnerFXTrader .

Join Jeremy’s distribution list.