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10 Nov 2014
EUR/USD: Downtrend intact, risk of bounce on 5-wave pattern - JPMorgan
FXStreet (Bali) - The EUR downtrend remains intact, but the bounce risks have increased significantly, notes Thomas Anthonj, FX Strategist at JP Morgan.
Key Quotes
"The EUR bears are still dominating price action in EUR/USD, but even an inexperienced Elliott wave fan can’t deny the obvious 5-wave pattern now showing in the decline from 1.3993. The fact that we detected 3 Fib.- projections for a potential 5th wave low between here and the weekly trend line support at 1.2220 (i.e. at 1.2370, at 1.2318 and at 1.2260) adds to the risk that we might just see the final stage of the bear-cycle from 1.3993. This implies that a profound rebound (wave B or wave II) could be looming and requires intensified alert management."
"According to the axiom that the trend is your friend we nevertheless see good chances to extend to 1.2220 and maybe even to 1.2042 (2012 low) as long as the market is not breaking above 1.2520 (minor 38.2 %), which would call for a broader recovery to 1.2875 (38.2 % on higher scale). Only a decisive hourly close above the latter (i.e. above 1.2995) would constitute a game change in favor of a much broader recovery to 1.3179 (50 % on big scale) and possibly to 1.3609 (76.4 %). As for EUR/JPY we see the odds in favor of a straight extension up to 152.07 (76.4 %), but need a decisive daily close above 142.96 (minor 76.4 %, i.e. above 143.25) to eliminate the risk of missing another corrective leg down to 128.10 (int. 38.2 %)."
Key Quotes
"The EUR bears are still dominating price action in EUR/USD, but even an inexperienced Elliott wave fan can’t deny the obvious 5-wave pattern now showing in the decline from 1.3993. The fact that we detected 3 Fib.- projections for a potential 5th wave low between here and the weekly trend line support at 1.2220 (i.e. at 1.2370, at 1.2318 and at 1.2260) adds to the risk that we might just see the final stage of the bear-cycle from 1.3993. This implies that a profound rebound (wave B or wave II) could be looming and requires intensified alert management."
"According to the axiom that the trend is your friend we nevertheless see good chances to extend to 1.2220 and maybe even to 1.2042 (2012 low) as long as the market is not breaking above 1.2520 (minor 38.2 %), which would call for a broader recovery to 1.2875 (38.2 % on higher scale). Only a decisive hourly close above the latter (i.e. above 1.2995) would constitute a game change in favor of a much broader recovery to 1.3179 (50 % on big scale) and possibly to 1.3609 (76.4 %). As for EUR/JPY we see the odds in favor of a straight extension up to 152.07 (76.4 %), but need a decisive daily close above 142.96 (minor 76.4 %, i.e. above 143.25) to eliminate the risk of missing another corrective leg down to 128.10 (int. 38.2 %)."