Euro / U.S. DollarShort
EURUSD - SHORTING RETRACEMENT IN NEW BULLISH CYCLE
About a month ago I published the following charts:
1. EURUSD - Could it be the come back kid? (Updated), identifying approximate downside target Wave A = Wave C in the region of 1.03581. I did not feel that it was headed for parity as may analyst and commentators were suggesting.
2. Also publish DXY chart suggesting that it was at potential reversal zone, with approximate early turning point being March .
(See links below for both of these charts)
Similarly, in previous DXY chart I posted and updated suggesting a limiting triangle could be at play with estimated turning point being early April (see chart below). Based on this chart, I should have clearly identified both DXY and EURUSD had already turned around the time of publishing the above charts.
However, due to all the media and prevailing bullish sentiments for USD, my views got distorted & felt that both DXY and EURUSD had their respective high and low to be retest before turning. The lesson is that where technical are clear analyst must guard against being influence by other factors to maintain integrity of analysis.
The thrust of the above is that whilst seeing fundamental were and still seems to be suggesting Dollar strength the technical already suggested that we might have reached the turning point and now the fundamentals will eventually confirm the technicals. So whilst not dismissing the fundamentals, here is a case where technical appears to be leading.
Taking the earlier DXY charts from Jan 2015 in to account and reviewing EURUSD a fresh seems to suggest that we might have actually commence new bullish cycle and any weakness are likely to be retracement along the way. Hence the short trade being suggested is counter trend trade and hence of higher risk. Conservative traders could actually wait for the retracement to complete and plan to go long.
Here is the summary of conditions for short trade:
1. From the DXY chart's estimated early April for topping based on Elliot Wave counts, time symmetry and Fibonacci price projection with corresponding low in EURUSD forming at the same time, appears to be confirmed. Hence we could well be in major new cycle with EURUSD now in Bullish cycle.
2. From the low in EURUSD it appears to have risen in 5 wave cycle which resembles a rising wedge, as Leading Diagonal very close to being completed. If this it correct, then the expectation would be, that we should see an ABC zigzag retracement to downside before resuming the bullish cycle. It is this retracement we are looking to consider for short trade..
3. Leading Diagonal is very close to completion and is displaying RSI divergence with price between wave 3 and wave 5 peaks on daily and H4 time frame.
4. Price has approached an area of previous resistance and confluence formed by several Fib projections and extensions in the area of 1.145 -1.15 as shown on the chart
5. Zigzag retracement could be at least to 1.1 as a round number but could be deeper. We will be guided by price action once we have the 1st leg of the zigzag completed.
As a side point the significance of DXY topping is that if this is a major top then it will have impact in all USD denominated assets and wider a field in the ocean of finance as they are all interconnected with USD being the reserve currency.
Warning: This is my interpretation of price action using TA approach that I consider helps me most5 but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciates my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
danv-charting.com
1. EURUSD - Could it be the come back kid? (Updated), identifying approximate downside target Wave A = Wave C in the region of 1.03581. I did not feel that it was headed for parity as may analyst and commentators were suggesting.
2. Also publish DXY chart suggesting that it was at potential reversal zone, with approximate early turning point being March .
(See links below for both of these charts)
Similarly, in previous DXY chart I posted and updated suggesting a limiting triangle could be at play with estimated turning point being early April (see chart below). Based on this chart, I should have clearly identified both DXY and EURUSD had already turned around the time of publishing the above charts.
However, due to all the media and prevailing bullish sentiments for USD, my views got distorted & felt that both DXY and EURUSD had their respective high and low to be retest before turning. The lesson is that where technical are clear analyst must guard against being influence by other factors to maintain integrity of analysis.
The thrust of the above is that whilst seeing fundamental were and still seems to be suggesting Dollar strength the technical already suggested that we might have reached the turning point and now the fundamentals will eventually confirm the technicals. So whilst not dismissing the fundamentals, here is a case where technical appears to be leading.
Taking the earlier DXY charts from Jan 2015 in to account and reviewing EURUSD a fresh seems to suggest that we might have actually commence new bullish cycle and any weakness are likely to be retracement along the way. Hence the short trade being suggested is counter trend trade and hence of higher risk. Conservative traders could actually wait for the retracement to complete and plan to go long.
Here is the summary of conditions for short trade:
1. From the DXY chart's estimated early April for topping based on Elliot Wave counts, time symmetry and Fibonacci price projection with corresponding low in EURUSD forming at the same time, appears to be confirmed. Hence we could well be in major new cycle with EURUSD now in Bullish cycle.
2. From the low in EURUSD it appears to have risen in 5 wave cycle which resembles a rising wedge, as Leading Diagonal very close to being completed. If this it correct, then the expectation would be, that we should see an ABC zigzag retracement to downside before resuming the bullish cycle. It is this retracement we are looking to consider for short trade..
3. Leading Diagonal is very close to completion and is displaying RSI divergence with price between wave 3 and wave 5 peaks on daily and H4 time frame.
4. Price has approached an area of previous resistance and confluence formed by several Fib projections and extensions in the area of 1.145 -1.15 as shown on the chart
5. Zigzag retracement could be at least to 1.1 as a round number but could be deeper. We will be guided by price action once we have the 1st leg of the zigzag completed.
As a side point the significance of DXY topping is that if this is a major top then it will have impact in all USD denominated assets and wider a field in the ocean of finance as they are all interconnected with USD being the reserve currency.
Warning: This is my interpretation of price action using TA approach that I consider helps me most5 but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciates my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
danv-charting.com
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