Happy Holidays to everyone and may all your wishes come true!! Today’s post is about EURUSD as it has broken above resistance levels at 1.3125 and made a top at 1.3307. At this previous post http://trading2day.com/?p=126 we mentioned that we would be bullish if resistance was broken. This breakout gave us almost 200 pips of profit. Prices however started moving downwards and we might see a back test of the broken red resistance line. The move from 1.2850 area has finished and EURUSD is now correcting this. This correction could push prices as low as 1.3040 (61,8% retracement) or as low in order to touch the light green upward sloping trend line. As mentioned in the previous post, this formation could prove very bullish for EURUSD and why not achieve 1.37. Our bullish wave count is depicted on the chart above. For the time being prices seem to be in a corrective wave downwards. Corrective waves are best left alone and not traded. The time to trade will be when we see the end of this correction. Trend is up on the intermediate level, but in the short-term we have to watch carefully the form this correction will take.
As shown in the chart above, the form of the decline from the highs at 1.3307 is not impulsive. Specially the second part of the decline from 1.3295 to 1.3157 is composed by overlapping waves. This is our first clue that the decline is most probably a correction and when it will end, the uptrend will resume with targets higher than 1.33. A very raw sketch of the possible future movement of the correction is depicted in the chart. This does not mean we expect EURUSD do behave exactly like this.
Concluding, intermediate term remains upward but in the short term prices are stalling and can move sideways or lower towards 1.3050. As always, thank you for taking the time to catch up on my thoughts.