BarroMetrics Views: The EURUSD 2010-08-11
I thought this an appropriate time to review the state of the EURUSD (Euro vs US$).
CONTEXT
Figure 1 shows a synthetic EURUSD from 1971. The pattern shows what I call a choppy uptrend: each time we make new highs, the EURUSD breaks into the previous congestion.
If this pattern continues, then the minimum target is the low Nov 2005. Figure 2 shows this low to be around 1.1642 [note there are slight differences in the data used in Chart Store (Fig 1) and my data (Fig 2)]. But 1.1642 is only the minimum target; my preferred target is the area bounded by the brown rectangle in Figure 1, 1.167 to 1.065. So far the reaction low has been around 1.190.
CURRENT PRICE ACTION
There are two possible structures that are governing the current price action:
- We are seeing the formation of ‘E’, the last leg of a running correction. (Figure 3) OR
- As Figure 4 shows, there may be a large, sideways pattern forming between 1.6037 and 1.1642. The chart shows the Primary Zones and the Value Area (33% - 50% - 67%) resistance zones.
Given the picture provided by ‘CONTEXT’, I am leaning to the first scenario as being the most likely. If so there are two zones for ‘E’ (Figure 3):
- 1.3405 to 1.3265 (the EURUSD poked into this zone in the last 14 days) and
- 1.4055 to 1.4205
So the question now is: have we seen the high for the EURUSD or can we expect a move to 1.4055 to 1.4205? I’ll deal with that tomorrow.
(For those who have not read Nature of Trends, Figure 5 shows the idealized Running Correction Pattern and the expected price action on completion of the correction).
Figure 1 EURUSD 1971 to date
Chart through the courtesy of The Chart Store
Figure 2 EURUSD (GFT Data)
Figure 3 EURUSD Running Correction Scenario
Figure 4 EURUSD Sideways Scenario
Figure 5 Running Correction Pattern
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