A major correction is underway in the EURGBP. The rally from .6535 (January 2007 low) is in 5 waves, therefore a 3 wave decline is expected. The decline likely reaches at least .7430; which is the confluence of the former 4th wave and the 38.2% of .6535-.7983. One reason to have confidence in the ‘topping very soon’ scenario is that one can count a clear 5 waves from .7391. Near term resistance is at .7917 and .7932.
As expected, the EURCHF continues to advance in what is probably a countertrend rally. We have stated for weeks now that the rally was likely to reach at least 1.6075-1.6253 (50% to 61.8% of 1.6827-1.5326). One possibility is that the rally from 1.5326 is unfolding as a double zigzag. The second zigzag would equal the first at 1.6102; which is close to the 50% level. Near term support is 1.5900.
Last week, we wrote that “we expect a correction in the EURCAD near term as it appears that 5 waves are complete at 1.4410. Expect the countertrend decline to bring the pair back to at least the 38.2% of 1.4410-1.6324 at 1.5593.” An initial decline reached 1.5702, which we are treating as wave A within an A-B-C decline. Wave B is the bounce that is underway now. The resistance zone is 1.5940-1.6087.
As long as price is above 1.6743 (red line), we are treating the rally from 1.6743 as wave 1 of larger 3 (within the 5 wave rally from the October low at 1.5491). If the EURAUD comes under 1.6743, then a larger expanded flat is unfolding and we would look for resistance near 1.6470 (black line).
The rally from 1.8188 might be the first wave in a 5 wave bull cycle. Bigger picture, the rally is viewed as the beginning of a 3rd wave within the 5 wave bull cycle from the July 2007 low of 1.7029. Near term, look for support in the 1.8947-1.9182 window. This is the 61.8% - 50% of 1.8188-2.0177.
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[B] [B]TREND ANALYSIS[/B] is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
[B]SCHEDULE[/B]
Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD
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