Euro and Pound Ranges Trump all Other Considerations
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Volatile ranges have taken hold in the EURUSD and GBPUSD and will probably last into next week (perhaps a bit longer) before terminal thrusts into fresh lows.
The EURUSD remains in a range, which will probably tighten for the rest of the week. A break from the range (triangle) is expected next week. To repeat yesterday�s analysis, which remains valid; �the nature of price action since last week�s low strongly suggests that a triangle is unfolding as a 4th wave within a 5 wave decline from 1.6040. Very short term, slightly lower prices in wave d of the triangle would be followed by an e wave that completes the triangle. If the triangle interpretation is correct then price will remain below 1.3302 and drop to a new low (below 1.2327), perhaps as early as early next week. I will look to identify completion of the triangle going forward in order to position for the drop below 1.2327. Until then, the EURUSD is a range trading candidate.� The mentioned wave d could be complete although additional weakness towards 1.2600 is possible short term before the expected wave e bounce.
The larger USDJPY trend is down so strength should be sold. Evidence that favors a new low is the momentum extreme (RSI) at 90.86. As I�ve mentioned many times before, price extremes (highs and lows) rarely correlate with momentum extremes. Instead, price extremes occur with momentum divergence. Support begins at 96.
The GBPUSD is supported by a long term trendline that dates to 1985 (see purple line at bottom of chart). I expect a larger bounce off of this line, regardless of the larger trend. I have presented a potential count from the 2007 top. Under the above count, a 4th wave is underway now that would likely take the form of a triangle or flat (the triangle labels are on the chart�a-b-c-d-e). The result would be a volatile range over the next several weeks before a break to a new low.
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