EUR/USD and GBP/USD Elliott Wave Update by Sid from ElliottWavePredictions.com. Click on the charts twice to enlarge.
Even though the wave count in my last EUR/USD post was not invalidated, it came so very close that I revisted all timeframes on both the Euro and British Pound, and here are the results.
Both the EUR/USD and GBP/USD currency pairs have been carving out apparent triangles starting way back in late 2008. The triangle in the Pound, when looking at a weekly chart (shown below), has much cleaner “look” to it, with wave E creating an obvious “three”, and retracing almost exactly a very common (and relatively deep) .707 of the previous wave D. It appears most likely that wave E ended in September of this year.
However, the triangle in the Euro is less tidy, with a wave E (as I have been counting it) ending all the way back in March, retracing only .382 of wave D, and not lasting near as long as the wave E in the Pound. The alternate count in the Euro (also shown on the weekly chart below) is that wave D ended in July, thereby forming a “flatter” triangle, with wave E yet to complete. The .618 target for wave E in this alternate view is all the way up at 1.3832.
This brings me to my main point. Since wave E in the Pound already lasted proportionally long enough in comparison with the other waves in the triangle, and finished (back in September) with a fairly deep .707 retracement of wave D, if the Euro was to rally from here all the wave up to the alternate 1.38 area, there likely isn’t room enough for the Pound to rally in a similar manner (against the US Dollar) without invalidating its triangle by moving above the extreme of wave C at 1.6746. So, when simultaneously considering the triangles in both the Pound and the Euro, I’ve been thinking, and continue to think that wave E in the Euro did, in fact, end back in March. This is why I have leaned heavily toward a bearish bias on the Euro for many months.
The rest of the Euro story is told on the daily and 360-minute charts below. I reworked the Euro wave count up from the July low today, and because my S&P-500 wave count expects a bit more rally (up to 1441, but not above invalidation at 1464.02), upward movement in the Euro is likely incomplete, with a final green wave 5 due next. The upward target zone for green 5 is fairly large, because 5th waves can truncate or extend. This leaves a target zone for the end of the upmove in the Euro somewhere between 1.31 to 1.3228. Movement below 1.30155 would indicate that a top for wave 2 black is likely “in”.