In my last published chart on GBPUSD and “Brexit” fog (see link below), the suggested target appears to have been met, but feel it happened too quickly. So more sideways action and decline is anticipated.
The effect of “Brexit” fog in not just limited to UK as has been noted from the reaction from wider financial market. Eurozone (EU) is intricately linked to this even more.
Many are implying that the EU will be very tough with UK to make an example out of them in withdrawal negotiation. Hard to tell , but various competing factors could make it messy. During which both GBPUSD & EURUSD remain weak against most other major currencies.
Looking through the price chart of the EURGBP from Elliottwave perspective, it seems to suggest that EURUSD could be the weakest currency for extended period.
From the Screencast snapshot of price data of EURGBP from FXTop.com (screencast.com/t/saru7rsOf ) and assuming it is correct and I have interpreted wave counts correctly, it could offer an excellent opportunity to profit from shorting EURGBP and EUR against other currencies. So let’s explore this:
General Observations & Major Elliottwave counts. 1. Price high formed in 1995 is a possible top of an ‘abc’ zigzag we will label this {W} . 2. A retracement low in 2000 is also zigzag which we can label as {X} as it is of the similar cycle degree. 3. Consequently the bullish move of this low to 2008 high is also a zigzag and forms a cycle wave top {Y} which marks a major corrective high of WXY cycle from 1950s low. 4. The price decline of this high do not appear to be of 5 wave impulse but rather overlapping and hence corrective. If correct this should also form a zigzag, which from the price action since looks like a running flat abc of 3-3-5 configuration. 5. The May 2010 low is a complex zigzag wxy, forming wave ‘a’ which was retraced in May 2011 high forming wave ‘b’ of flat. 6. Subsequent decline is part of wave ‘c’ of 5-5-5-5-5 configuration but taking the form of “Expanding Ending Diagonal” of which we are about to complete wave ‘iv’ and wave ‘v’ could commence soon developing in a zigzag decline. 7. The completion of the cycle could be in the region of 0.65 by mid 2018 or later.
Technical Summary on Weekly: 1. Dumping against median line of pitchfork 2. Also at 100 MA on weekly and 200 on daily. 3. Has retraced approx 78.6% of the wave iii decline (ie from 2013 high to July 2015 low) 4. Potential RSI divergence with March 2016 high on weekly. 5. Possible time symmetry between highs of June 2011 - Feb 2012 and Feb 2012 - current high.
Conclusion: If the above holds then both the GBP and EUR will likely remain weak and EUR could be the weakest of all the major currencies.
Action: 1. EURGBP could offer multiple opportunities to short using a daily chart a potential short is imminent, could be narrowed down on H4 chart with initial target of 0.76 second around 0.73. This is the clearest trade with defined risk. 2. From my analysis I am of the view that USD & JPY will remain relatively strongest 2 of all major pairs hence shorting EUR against both of these could be profitable for longer term trades but could also carry risk of sharp retracement.
Warning: This is my interpretation of price action using TA approach that I consider helps me most5 but could be completely wrong. Therefore as always, do your own analysis for your trade requirement and ignore my views.
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Revised Trade Entry - Below Close of last H4 : Little high than originally anticipated but at better terms. Could trigger later today or tomorrow
DanV
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The downside did not carry through as anticipated, so the chart is retired for now though larger picture still remains but will have to review the wave counts and possible upside. Will re-publish this chart once the wave counts are clearer./
DanV
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Eventually it seem that EURUSD is about to resume downtrend. So watching for confirmation on EURGBP would be interesting for the short trade at better price than one suggested in the chart.
Hiisham
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have the same view
DanV
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Thanks for sharing your chart looks very good. Little puzzled though why you have wave i and ii labelled where you are showing. Are you also suggesting an expanding ending or leading diagonal of 3-3-3-3-3? If so it could be very stretched but not impossible.
Thanks for sharing appreciate it.
Hiisham
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Good question , why i do i & ii , it's a 1 & 2 ... big waves i did not care about symbols,
we will see a fall down unit finish the BIG FIVE WAVE
DanV
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I understand. I am not bothered about i or 1. But whether the entire decline from 2008 high is part of the cycle of 1 - 5 wave impulse Because I felt it is abc and we could see wave v or 5 of c commence soon if not started.
Hiisham
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Mmm..... the Monthly candle will give us a clearly view , let's wait until Friday