EURUSD—overextended

The Euro is clearly overextended and it seems everyone is looking for a correction. However it's not happening yet. I wrote a couple of weeks ago about how the pair could get into the 1.40s before a correction. How far into them could it go?

The .618 correction of the entire move down from 1.6041 is at 1.4450. A downtrend line drawn from that 1.6041 high comes in at 1.4557. The high this past January 13th was 1.4579. So that's quite a bit more room for movement. It could go even higher. For example, if you believe in those harmonic patterns and you liked the potential bat I illustrated last week we're talking 1.4771. If you believe, as I do, that this is an Elliott wave C it equals A at 1.4030. However 1.618 times A would take it to 1.4998.

Even if those moves are possible, this move looks tired and there will most likely be some sort of correction. There were two doji days in a row, the angle of ascent is impossibly steep and the pair is very overbought. A dip to 1.3335 would be ideal to try another long but if it didn't get that far look for support at 1.3637.

I'm still thinking a short entry is nearby but we'll see. A look at the weekly chart shows that the overall move looks corrective. Here's that chart:










© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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