The Euro Ready for Bounce?

Dear Traders,

I hope you had a good weekend with some relaxation and time for improving the trading skills! Weekends are always good moments for back testing and paper testing.

In today’s article we will analyze the EURUSD and EURAUD, as well look back at some of the analysis made in the past on XAU and Yen.

The EURUSD has made a sizeable correction of its big up move up on Thursday and Friday. The 3 wave corrective has brought the currency pair from its 1.37 high back to a recent low of 1.3350.

On the 4 hour chart we are making lower lows and lower highs… Does the signal a change in trend? It might, but not yet in my view.

The 4 hour chart is without doubt showing signals of a turnaround, but from the day chart perspective we actually only made one move down. Or, in other words, the day chart is still showing higher highs and higher lows. The likelihood of a bounce or continuation of the uptrend is definitely possible. And there is a decent chance it could do so here.

My reasons for this are:

–          Huge sideways consolidation in this area might give support

–          Price is at 500 fib of entire 3 waves up

–          Price is at 786 of last swing high swing low

For me to assume a full trend change has been completed, I would need to see the EURUSD break the day chart low at +/- 1.3260. Until this happens, the EURUSD uptrend might resume at any moment.

In my opinion the uptrend can either continue from:

a)       The current price levels

b)      886 Fib at 1.33

c)       The bigger 618 fib at 1.3268.

If those levels were to be broken, then the entire ball game changes.

Be careful, ECB president Draghi is speaking tomorrow so we want to be careful with that!
The EURAUD is showing similar interesting signals. The currency pair seems to have made an ABC correction to finish a wave 4 of a wave 3. That would leave a wave 5 of 3 to be completed.

The EURAUD has hidden bullish divergence because price made a higher low, yet the oscillator made a lower low.  This could translate to a big upside move.

The only worrisome element of the upside in my opinion is that fact that waves B and C have clearly bounced a decent distance from the top and bottom. If the current move up would again respect the top, we could see a huge triangle formed with an ABCDE. This would mean that the wave 4 is not yet finished and we could see more corrections before the actual wave 5 commences.

Keep en eye on that trend line if you are in a long.
In today’s article I also wanted to revisit Gold and then Yen.

After a week or more of sideways corrections, the XAUUSD finally made its anticipated down move.  In that sideways move Gold never broke the top, therefore never negating the original count which was made on XAUUSD more than a week ago.

The first target is double bottom at 1625.
Then 1590-1600 at the -0.272 target.
Then 1550-1555 at the -0.618 target.

The Yen indeed made a correction as mentioned in Thursday’s article. It retraced some 200 pips from the 94 high. It looks like we are back on the way up. However, I am still cautious of the 94.50-95 price levels. To a certain extent I would not be surprised if we get a bigger retrace before moving up. I will therefore only monitor the UJ for a while. If it does break through, then I am interested in 4 hour pull backs for the upside. If it does not, then I am looking to rejoin the uptrend when it finishes its pullback.

As always, thanks for reading! Please let us know if you like these articles, and what else you would like to see discussed in this week’s article. Good Trading!




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