EUR/USD has slowly been working itself lower. The technical pattern has become unclear so we look for clues that may tip us off to the next move.
On an intraday basis, we can identify an impulse wave lower. Impulse waves can make up larger impulse waves or they can be embedded in the sub-structure of a corrective wave. Regardless of the larger pattern EUR/USD is building, we can count the five wave impulse as completed. The Relative Strength Index divergence on the 4 hour chart is consistent with a fifth wave. Therefore, the higher probability move is a bounce back to 1.17.
Struggling to trade EUR/USD? This could be why.
At 1.17, the Elliott Wave models diverge with some showing the move as being the start to a new trend higher that retests 1.20. Other Elliott Wave models suggest the move to 1.17 is just a partial retracement of the previous down trend.
We will keep an eye on the structure of the advance, if it occurs, to see if it forms in five waves (bullish) or three waves (bearish).
The sentiment picture continues to support bullish patterns. The current sentiment reading is -1.8 with the net short traders growing. This mixes as a bullish sentiment signal. View the live sentiment reading to keep on top of any changes that may occur.
Bottom line, the higher probability EUR/USD move is a bounce higher towards 1.17. Depending on the structure higher will then begin to eliminate the continued bullish pattern or if the bearish resolution prevails.
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---Written by Jeremy Wagner, CEWA-M
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Other Elliott Wave forecasts by Jeremy:
Price action analysis for AUDUSD, NZDUSD, EURUSD [Webinar recording]
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