The EURGBP is due for a major correction that should reach at least .7430. Similarly, the expect a EURCAD correction to reach 1.5600. The EURCHF, EURAUD, and EURNZD patterns are bullish near term but specific levels need to hold.
A major correction is about to take place 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.
We wrote a few weeks ago that “it is possible that a low is in place at 1.5326.” We maintain that a 5 wave decline is complete at 1.5326 and that the EURCHF is headed higher (albeit in a countertrend rally). Expectations are for the rally to reach the 1.6076-1.6253 zone (50%-61.8% of the decline). If this forecast is correct, then price should remain above 1.5534.
Although the larger trend is bullish, 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.
As long as price is above 1.6743 (and preferably 1.6930), 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.
We wrote two weeks ago that “the pair is headed much higher in the coming weeks and months…above 2.0185 at minimum. With a wave 2 (or B) low in place at 1.8188 and with the EURNZD breaking through the 200 day SMA, our confidence that a longer term bull trend is underway is high. Ideally, price remains above 1.8960.” The EURNZD has accelerated higher and expectations are for this to continue as long as price is above 1.9237.
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
TREND ANALYSIS 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.
SCHEDULE
Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD
