Many traders, as well as a fair number of market analysts, were caught by surprise when the euro made its impressive +450-pip rally last Thursday — which is a shame, because the market did exactly what we expected it would do in our last weekly analysis.
First, price spent most of the week moving towards the downside. It reached our first target at 1.0617, followed by the second target at 1.0594, then it continued a little lower to 1.0525, where the market completed its “ending diagonal” pattern.
Ending diagonals, by their nature, are *terminal* moves, signaling the completion of its larger trend. As such, they are most often followed by a strong and swift movement in the opposite direction, which is exactly what the euro did near the end of the week.
We’re updating our counts to reflect the most recent price action and to present tighter targets and invalidation points.
Weekly Main Count
– Invalidation Point: 1.1087
– Confirmation Point: –
– Downwards Target: 1.0807 – 1.0699
– Wave number: Minute b
– Wave structure: Corrective
– Wave pattern: Zigzag, Flat, Triangle, or Combination
Weekly Alternate Count
– Invalidation Point: 1.0525
– Confirmation Point: 1.1087
– Upwards Target: 1.1302 – 1.1782
– Wave number: Minor C
– Wave structure: Motive
– Wave pattern: Impulse or Ending Diagonal
Please click on the charts below to enlarge.
The bigger picture sees that the euro is moving towards the downside in cycle wave x, which is forming a double zigzag labeled primary waves W, X and Y.
Primary wave Y is forming a zigzag labeled intermediate waves (A), (B) and (C).
Intermediate wave (A) formed an impulse labeled minor waves 1 through 5.
Within it, minor wave 3 reached 261.8% the length of minor wave 1.
Minor wave 5 extended as an impulse labeled minute waves i through v, reaching 161.8% the length of both minor waves 1 and 3.
Intermediate wave (B) formed a double zigzag labeled minor waves W, X and Y, retracing a little less than 38.2% of intermediate wave (A).
Intermediate wave (C) is most likely forming an impulse labeled minor waves 1 through 5, which will complete primary wave Y, and therefore cycle wave x. This will be confirmed by movement below 1.0462.
At 0.9830 primary wave Y would reach 100% the length of primary wave W, then at 0.9536 intermediate wave (C) would reach 61.8% the length of intermediate wave (A).
This wave count is invalidated by movement above 1.1087 as minor wave 4 may not enter the price territory of minor wave 1.
Main Weekly Wave Count
The main count sees that intermediate wave (C) is most likely forming an impulse labeled minor waves 1 through 5.
Within it, minor wave 2 formed a double combination labeled minute waves w, x and y, each forming a zigzag labeled minuette waves (a), (b) and (c), retracing a bit over 61.8% of minor wave 1.
Minor wave 3 formed an impulse labeled minute waves i through v, reaching almost 161.8% the length of minor wave 1.
Within it, minute wave v formed an impulse labeled minuette waves (i) through (v), reaching almost 161.8% the length of minute wave iii.
Within it, minuette wave (v) formed an ending diagonal labeled subminuette waves i through v.
Minor wave 4 may be unfolding as any corrective pattern, but until more data is available we’ll assume it’s taking the simplest form of a zigzag labeled minute waves a, b and c.
Within it, minute wave a is most likely complete.
This count expects the euro to start moving sideways to downwards in minute wave b.
At 1.0807 minute wave b would retrace 38.2% of minute wave a, then at 1.0699 it would retrace 61.8% of its length.
This wave count would be invalidated by movement above 1.1087 as minor wave 4 may not enter the price territory of minor wave 1.
Alternate Weekly Wave Count
The alternate count sees that intermediate wave (B) is actually still unfolding as a flat labeled minor waves A, B and C.
Within it, minor wave A formed a double zigzag labeled minute waves w, x and y.
Minor wave B formed a zigzag labeled minute waves a, b and c, retracing 95% of minor wave A.
This count expects the euro to be moving towards the upside in minor wave C, which is most likely forming an impulse labeled minute waves i through v. This will be largely confirmed by movement above 1.1087.
At 1.1302 minor wave C would reach 61.8% the length of minor wave A, then at 1.1782 it would reach 100% of its length.
This wave count would be invalidated by movement below 1.0525 as minute wave ii may move beyond the start of minute wave i.