EUR/USD: A Third Wave of an Impulse in Sight

Long

Euro / U.S. Dollar (FX:EURUSD)

Updated

FX:EURUSD Euro / U.S. Dollar

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Analysis
The advance from Oct. 03, 2023 low of 1.0448 to 1.1140 subdivides into five waves. This wave pattern is significant because impulse waves identify the direction of the dominant trend. Thus the five wave advance implies further buying to come that would take prices above 1.1140 as wave 3.
The subsequent decline in EUR/USD is developing in three waves; Double Zigzag correction labelled ((w))-((x))-((y)) with wave ((y) in progress, supports this analysis. Counter trend price action typically consists of three waves, it's slow, choppy and often contained within parallel lines.
The depth of corrective wave guideline suggests that corrections tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most often ending near its terminus.

More over, in ratio relationships, sharp corrections tend more frequently to retrace 61.8% of the previous wave particularly when they occur as wave 2 of an Impulse or wave B in a larger Zigzag. Observe that this level is near the previous fourth wave of one lesser degree.
Within wave 2, wave ((y)) = 0.618 X ((w)) at 1.0701. Observe that this level is near the previous guidelines.
All this evidence virtually suggest that a bottom is at hand and a reversal could be around the corner.
Trade Plan
Entry: Buy at Market Price
Protective Stop: 1.0448;in an Impulse wave 2 CAN NEVER retrace 100% of wave 1.
Target: 1120 pips; in an Impulse the third wave commonly travels 1.618 times the gain of the
first as in; wave 1 = 692 pips (1.1140-1.0448), wave 3 = (1.618 X 692)
Risk-Reward: 1:3

Comment:

We have what could be the start of a strong wave 3 to the upside suggested by price action penetrating the upper boundary of the descending parallel channel.

A break above 1.0897 will virtually indicate the correction, wave 2, ended at 1.0694.

Comment:

Turing lower in three waves from 1.0888, wave ii. For this bullish outlook, price action should stay above 1.0694. A breach above 1.0888 will virtually indicate the correction ended at 1.0789.

Comment:

Price action took out our 1.0888 key level invalidating the leading diagonal scenario which prompted us to switch to our alternate count; wave ii ended at 1.0789 as a Zigzag correction as stated earlier.

ALTERNATE COUNT
Wave ii is unfolding as a Flat correction; wave ((A)) ended at 1.0789, wave ((B)) in progress.

BOTTOM LINE
Bullish above 1.0694

Comment:

4 H Time Frame
Price action broke above 1.0897 which virtually indicates the correction wave 2 ended at 1.0694 as a Double Zigzag as anticipated on Feb 22, 2024. Wave 3 to the upside is underway.
As a guideline, in an impulse, the third wave commonly travels 1.618 times the length of the first. Thus wave 3 = 1.618 X wave 1 at 1.1813.

RECOMMENDATION
Raise protective stop from 1.0448 to 1.0694

BOTTOM LINE
Bullish above 1.0694

Comment:

BOTTOM LINE
Bullish above 1.0795; wave iii

Comment:

A Flat or Triangle wave ((4)) alternating with a zigzag wave ((2)). Price action must not break below 1.0875.

Comment:

Price broke below our key level 1.0875 which invalidated the count prompting the relabeling as wave ((i)) underway from 1.6094.

Bottom line: Bullish above 1.0694

Comment:

Regularly revise the alternate count so that if the market deviates from the anticipated scenario, the alternate count provides a new viewpoint and promptly becomes the preferred count.
The count from 1.0981 high favors a double zigzag decline that should find support near 1.0857-1.036.
Alternate count suggests a Leading diagonal wave (a) of a larger wave ((ii)) zigzag correction. The count has a problem, wave iii of the diagonal is longer than wave i which is not always the case for a contracting diagonal.

Comment:

EUR/USD has advanced a bit further from 1.0834, which ideally serves as the wave ii low. Breaking above 1.0981 would support the idea wave iii is underway.
Alternatively, breaking below 1.0834 would suggest the idea wave (c) of zigzag wave ((ii)) underway from 1.0942

Comment:

Price broke below our key level (1.0834) which prompts us to shift to the alternate count. A leading diagonal from 1.0694 low followed by a three wave zigzag pullback wave ((ii)). Within wave ((ii)), wave (a) is a leading diagonal, wave (b) is a zigzag and wave (c) is unfolding as an impulse. Price action should find support between 1.0804-1.0796 and MUST stay above 1.0694.

Trade Plan 2
Entry: Buy at 1.0804-1.0796
Protective Stop: 1.0694; in an Impulse wave ((ii)) CAN NEVER retrace 100% of wave ((i)).
Target: 464 pips; in an Impulse the third wave commonly travels 1.618 times the gain of the first as in; wave ((i))) = 287 pips (1.0981-1.0694), wave ((iii) = (1.618 X 287)
Risk-Reward: 1:3

Comment:

The impulsive reaction from 1.0724 hints at wave ((ii)) ending as a Double Zigzag. A break above 1.0981 would indicate wave ((iii)) advance underway.

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