On the daily chart, one way to interpret the action from 1.1876 is from a bullish point of view as Euro makes its way up an upward sloping rectangle. The wave action would be:
Wave 1: 1.1876 to 1.2467 (591)
Wave 2: 1.2467 to 1.2152 (315)
Wave 3: 1.2152 to 1.3335 (1,183)
Wave 4: 1.3335 to 1.2588 ((747)
Wave 5: 1.2588 to either 1.4159 (1,571 pips) at which point began an ABC correction or to 1.4274 (1,686 pips) which then initiated a correction down to 1.2874.
That meets the three inviolate rules of an impulsive wave—wave three is not the shortest wave; wave four does not poke into wave one's territory, and wave two doesn't retrace more than wave one. The purpose of an impulsive wave is to make forward progress and price did do so. The action from 1.2784, though, is less clear. Bulls might say that would be the beginning of wave three. However, if it was then:
Wave 1: 1.2874 to 1.3862 (988)
Wave 2: 1.3862 to 1.3429 (433)
Wave 3: 1.3429 to 1.4942 (1,513)
Wave 4: Either it completed at 1.3970 or it is still in process. If it is still in process, then B topped at 1.4697 and C can go no lower than 1.3862 (because wave four cannot enter into wave one territory). In a zigzag, wave C is usually .618A, equal to A, or 1.618A . If it is .618 of A then that price is 1.4096. To equal A, the price would have to drop lower than 1.3862 which should not happen to preserve the Elliott count.
Euro touched a low of 1.4288 and now seems to be struggling to recover from there. If one examines a cloud chart (which I try to do as little as possible but as they become more popular it's worth glancing at them), Euro has descended down to the bottom of the cloud. However, since it entered from above, this is still bullish and supports the ABC correction theory.
However, there is another way to examine the price action from 1.1876 and that is as a large correction, made up of a double zigzag. I have marked the letters for this correction, a double zigzag, on the daily chart below and this fits in with weekly price action as well which is a big plus in my mind. If this is true, then there is a big drop ahead as we'd be in a third wave.
This just goes to show how loopy Elliott Wave can be if you attempt to use it as a trading tool. However, it can be evidence and it can indicate market psychology. The nice thing about either of these interpretations is that unless the 4th wave discussed above is complete, the most likely scenario is for additional moves down under either interpretation.
Looking at possible support, regardless of Elliott, when the price dipped to 1.3970, the 100-daily SMA held as support. Currently, the 100 is at 1.4143. That is very close to 50% of the move from 1.3429 to 1.4942 (1.4186) and .382 of the move from 1.2874 to 1.4942.
For resistance, the high today is 1.4404, just completed on the hourly chart. That was just above confluence but it was also a doji. Above that is 1.4450 and 1.4500. At that point, price would have regained the broken, short-term, hourly uptrend line.
Here's the daily chart:
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.