While short term corrections are certainly a possibility, the Euro crosses exhibit bullish structures on the daily charts. The most bullish of the crosses are the EUR / commodity currencies – EURCAD, EURAUD, and EURNZD.
The EURGBP is nearing the end of a 5 wave rally that began back in January 2007. When wave 3 is extended (as it clearly is here), waves 1 and 5 tend towards equality. In this case, wave 5 (from .7391) would equal wave 1 (.6535-.6867) at .7723. So, while the pair could rally a bit more, the next big move is lower in a large correction that will last many months if not an entire year or more.
The EURCHF drop from 1.6827 is in 5 waves, meaning that at least a countertrend rally is due. The rally probably reaches at least the former 4th wave extreme at 1.6230. It is possible that the 5 wave decline completed an expanded flat from the July 2007 high. We mention this because the rally from 1.6175 to 1.6827 (that ended in October 2007) is best counted as a 3 wave rally; which would make it a B wave.
We wrote last week that “the advance from 1.5491 to 1.7159 is a clear 5 wave advance. A 3 wave (A-B-C) corrective decline will likely resolve itself in the next few weeks…the rally that ensues should exceed 1.7159 and may be the beginning of a much more significant multi-year rally.” We had expected the EURAUD to test the 1.5850 level before the big rally started but it now looks a low is in place at 1.5922. Ideally, price remains above 1.6117.
We wrote last week that “the corrective decline is nearing completion. Wave Y would equal wave W at 1.7907. Another possible terminus for the entire decline is at the 78.6% of 1.7029-2.0170 at 1.7698.” The EURNZD did not reach these levels and instead put in a low at 1.8188. The pair is headed much higher in the coming weeks and months…above 2.0185 at minimum.
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[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: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Tuesday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD
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