Elliott Wave Analysis of the EUR/USD Currency Pair by Sid from ElliottWavePredictions.com. Click on the charts twice to enlarge.

Last week was pretty significant in my opinion, because the US Dollar lost ground at the same time as the US stock market. This could be a game changer if it sticks. These two have been pretty highly (inversely) correlated for quite a while now, and frankly, if the two were to de-correlate, I would have expected the Dollar to continue to strengthen, especially given the impulsive looking move starting the first week of May, while my expectation was (and still is) for the stock market to also strengthen in a wave 5, but only AFTER the current wave 4 burgundy completes. The definite de-coupling last week, along with a rally in the Euro of nearly 700 pips after what looks like a “3” (on a 4-hour chart) from May 4 thru May 23 has added additional weight to the alternate wave count for the Euro shown above, (also see the May 23 post) which labels the May 4 high as a wave 3 (pink) top, and the aggressive drop that started May 4 as a pink wave 4. Please note once again that the MACD supports this view, because there was NO divergence prior to May 4, which marked the 2011 high point of the MACD on a daily chart.

The 2 hour chart above shows that the Euro aggressively broke upwards out if its channel on Friday, which generally points toward impulsive wave 3 activity, rather than ABC corrective price action. If this up move from May 23 is wave 5 pink, it is possible that it may truncate by ending (after 5 green waves) below the May 4 high, or, if it moves above 1.49389, it can only make a slight new high if the 1-2-1-2 count is to remain valid. The target zone is quite small, and is shown by the blue oval on the daily chart. The internal structure of the waves will be paramount. Despite the precariously small target zone, I’ll be looking for a wave 3 peak in the MACD on a 4-hour chart, and then divergence, as the wave 5 green makes a new high, while the MACD cannot. My current opinion is that the November 11, 2009 high will hold, primarily because of the 5 clear non-overlapping waves to the upside in the US Dollar Index, which occurred starting at 70.70 in March of 2008.

This more bullish alternative for the Euro will be all but invalidated with movement below 1.43060.

Oh, by the way, the spammers started hitting the comments portion of my site in droves, and even though the spam filter caught them, out of safety, I’ve decided to once again turn off the possibility for comments on the site. We can always communicate through the Contact tab. Thanks . .