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EURUSD – 3rd January, 2014 – Monthly

In this monthly analysis, we’re going to review our previous counts, reassess the different possibilities for the euro’s movement over the coming months, and update our targets and invalidation points according to the latest price action.

For more background information, please refer to our previous monthly counts.

Main Monthly Wave Count

eurusd20131202weekly

This count sees that cycle wave x is unfolding as a flat correction.

Within it, primary wave A formed a zigzag labeled intermediate waves (A), (B) and (C). Intermediate wave (B) retraced nearly 78.6% of intermediate wave (A), and intermediate wave (C) reached a little short of 78.6% the length of intermediate wave (A).

Afterwards primary wave B began unfolding to the upside as another flat correction. Within it, intermediate wave (A) formed a zigzag labeled minor waves A, B and C, and intermediate wave (B) formed a double zigzag labeled minor waves W, X and Y which retraced about 95% of intermediate wave (A).

This count sees the euro moving to the upside in intermediate wave (C), within which minor waves 1 and 2 are most likely complete and minor wave 3 is unfolding to the upside.

The main point to notice about this count is that, since primary wave A was a zigzag, then cycle wave x must be a flat, and so primary wave B must retrace at least 90% of primary wave A. This means that this count expects the euro to move as high as 1.5622, and possibly higher.

At 1.4423 minor wave 3 would reach 100% the length of minor wave 1, then at 1.5455 it would reach 161.8% of its length.

This wave count is invalidated by movement below 1.2754 as within minor wave 3 no wave may move beyond the start of the first wave.

First Alternate Monthly Count Wave

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Our first alternate count involves the triangle scenario, which has two variations.

The first variation sees the entire cycle wave x to be a contracting triangle, within which primary waves A, B and C are complete. Primary wave D has retraced a little over 61.8% of primary wave C, so it’s most likely complete as well.

Assuming that primary wave D is complete, then this count expects the euro to start moving downwards again to finish primary wave E and the entire triangle of cycle wave x. At 1.2748 primary wave E would retrace 61.8% of primary wave D, then at 1.2429 cycle wave x would retrace 78.6% of cycle wave w.

The reason this count is lower in probability than the main count is that the wave relationships within the triangle are not very typical, although they’re definitely acceptable.

The good thing about this count is that it has two invalidation points, one at 1.4939 as wave D may not move beyond the end of wave B, and at 1.2041 as wave E may not move beyond the end of wave C.

eurusd20131202weeklyalt1var

The second variation of the triangle scenario sees that cycle wave x is a zigzag, within which primary wave A was an impulse while primary wave B has formed a running triangle.

This count expects that primary wave B is complete and that the euro is now moving towards the downside in primary wave C to complete cycle wave x. This will be confirmed by movement below 1.2041.

At 1.1599 primary wave C would reach 61.8% the length of primary wave A, then at 1.0182 it would reach 100% of its length.

The major drawback of this count is that primary wave B is taking too long to unfold compared to primary wave A. Technically, this doesn’t break any rules, but seeing that a correction is taking more than 20 times the duration of previous motive wave of the same degree puts serious suspicion on this possibility.

In addition, the entire triangle looks too wide at this point, and since this count assumes that the triangle is already complete or very near completion, there may not be enough time for it to converge properly.

None of these observations actually break any rules, but they’re enough to make this count a lower probability than the main count.

This wave count is invalidated by movement above 1.4939 as intermediate wave E may not move beyond the end of intermediate wave C.

Second Alternate Monthly Count Wave

eurusd20131202weeklyalt2

Our final count for this month looks at the possibility that the euro is preparing for a powerful third wave to the downside by forming a series of extensions.

Downwards movements labeled primary and intermediate waves 1 subdivide into five wave impulses, while minor wave 1 unfolded as a leading diagonal.

Upwards movements labeled primary and intermediate waves 2 subdivide very clearly as zigzags. Minor wave 2 unfolded as a double zigzag labeled minute waves w, x and y, which has already retraced a little over 61.8% of minor wave 1, so it’s most likely complete.

This count expects the euro to continue moving towards the downside in minor wave 3. This will be confirmed by movement below 1.2041.

At 1.0994 minor wave 3 would reach 100% the length of minor wave 1, then at 0.9203 it would reach 161.8% of its length.

The major drawback to this count is that intermediate wave (2) is longer than the higher-degree primary wave 2 in both absolute and relative terms. In others words, it spans more pips and it retraced a larger percentage of the preceding impulse. This doesn’t technically break the rules but it puts a big question mark on the entire count.

This wave count is invalidated by movement above 1.4939 as minor wave 2 may not move beyond the start of minor wave 1.

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