Today we will be doing a review of the EURUSD, GBPUSD and the EURGBP so…
Grab a cup of coffee, roll up your sleeves…
It is time for some work and analysis!
Today is a day of many interest rate decisions, announcements and speeches. If there is a day where you want to sit on the sidelines, then doing that today is a good choice!
The EURUSD made a huge fall during the last few hours. The 4 hour top of 1.36 could not be broken and the currency closed and reversed!
We can see now that the EURUSD indeed continued its bearish momentum of 2 days ago with yet another 3rd wave of down side. The EURUSD was indeed ready for that deeper correction as we careful speculated on in an earlier post this week. Currently I am very cautious as the currency has a moved a tremendous amount in just a few hours. This whole area could become a support area, as we are also at the target of the first wave. But for now, I am sitting on the sidelines till we get more information.
The GU made similar volatile moves. It moved with a very impulsive spike up but it still hasn’t broken the top as yet. This could indicate that one more move down for the last wave of wave 5 is possible. The statistical probability is in favor of a down move, but usually wave 5 and especially waves 5 of 5 are not the best place to start risking your capital if you are not in short trades from way higher.
Now it is time to mix things up a bit and analyze the cross the majors mentioned just now!
Similar to the Yen, the EURGBP has been making major moves upwards.
Some of you might be wondering:
1) Why is the currency so bullish?
2) Where does the drive come from?
3) Why is it not correcting itself?
4) Is there space for more upside?
What is your opinion on the ERUGBP?
Do you trade it all? Which is your favorite currency? Let us know in the comment box!
Let us try to answer those questions and more.
If we look at the Month chart, we can see that the EURGBP was in a huge up trend peaking at around 0.98. What followed was an ABC correction to the downside.
Looking at the strength and power of the move up, there is a high change that the EURGBP will attempt to retest or even break that top.
Considering the fact that the move down seems to have finished an ABC, which funny enough turned right at the 618 Fibonacci to the dot.
If this is wave 5 on the month chart, let us take a look at the daily charts for more confirmation.
On this time frame we can see that:
1) the EURGBP most likely made a 5 wave up for wave 1
2) The wave 2 correction of wave 1 turned at the 500 Fib
3) The wave 3 seems to have a wave 1 and 2 followed by another wave 1 and 2
4) Thus this current wave could be wave 3 of wave 3
The 5 internal waves of wave 1 neatly bounced of a Fib retracement and went to a Fib target. For those of you who are wondering why price action of the waves were overlapping each other, this is possible in a leading diagonal.
If that were true then the EURGBP would have a wave 4 and wave 5 remaining within wave 3, plus 2 more sets of wave 4 and 5. The 0.98 mark and double top all of sudden seems doable. Could we even break the top? Who knows, but it is possible.
If we know use extensions for the wave 1 and wave 1 of wave 3, then we can make a guesstimate where this wave 3 of wave 3 might end. Here we can see that there is a strong chance that this wave will end at .87-0.89. Using a parabolic would have been a good trailing method for this impulse!
That means wave 3 is either already finished or there is a small push up remaining. Waiting for the wave 4 to finish is therefore I think the safest option. When the wave 5 of wave 3 starts, that is when I am very interested in this currency pair. Read more here about long term trading strategy for the Forex market.
I wish you Good Trading!
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