The Fate of the EUR/USD to be Clearer After this Week
EUR/USD: After topping off Friday at 1.4485, the EUR/USD market is in a correction. The 1.45 resistance is important as 78.6% retracement and a psychological resistance. A break above is immediately a very convincing sign of bullish continuation. However we might be able to expect some more resistance here than our previous resistance at 1.4350 that brought a 100 pip dip to 1.4250 before the most recent rally. 61.8% retracement of this rally is at 1.4340, back to the previous resistance to test as support. Below that we might see a test of the 1.4240-1.4270 support zone.
EUR/USD Daily and 4H chart 4/11/2011
A look at the trend of corrections that broke below channels in 2011, we see that they have been becoming smaller and smaller.
1/4 -1/9: -560 pips
2/2- 2/14: -430 pips
3/7-3/11: - 280 pips
3/22-3/28: - 225 pips
4/11 - ?: ?
A correction to 1.4240 is about 250 pips. If the market corrects below this pivot, and then by more than 280 pips, we should start thinking that the bearish force this time is stronger. Before exploring this scenario, the more likely one should be a completed correction above 1.4250, maybe even less than a 225 pip move. A move to 1.4350 area is appropriate, or follows the trend of contracting correction. This is about a 150-pip decline. 1.43 is about a 200 pip decline from the top just to give you an idea of how strong this correction could be and still be less than 225 pips.
Then a rally should follow to retest and possibly break above 1.45.Looking at the daily chart, we see that a rally towards 1.5140 pivot is in sight in the medium term.
Now, if instead of this development, we have further bearish intent, here are some levels to anticipate as support. In other words, breaks below these confirm bearish strength. The 1.40-1.4050 zone is a very important support below the 1.4250 support. Below that we can be going towards 1.3850. If the market starts channeling, and we see non-overlapping moves, we can expect a major correction to the rally to start 2011. 1.34 is the next major pivot. There, another major decision will be upon the market.
EUR/USD weekly 4/11/2011
In the longer perspective and looking at the development from the Elliott Wave model, this bearish attempt reflects a continuation of a wedge pattern seen in the weekly chart. As you can see this has even further bearish implications. On the other hand if the current breakout action can be sustained, we have a more likely bullish impulse wave developing, where we are in the third wave of a third wave. This suggests acceleration, or non-significant corrections toward 1.5140, and maybe higher. Above this, we are looking at the 1.60 highs from 2008.
Will the Euro maintain strength after this week? Will the officials sound hawkish or dovish? We would love to hear your opinion.
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