Market Update – EUR/USD – 25 September 2008
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Written by Anthony Truong on September 25, 2008 – 4:02 pm
There are 2 main counts that I am following for the EUR/USD, from a long term perspective.
EUR/USD Weekly Chart (Count 1) - 24 September 2008
Count 1: The EUR/USD cross rate is forming a large, multi-decade “A-B-C” correction (see “Weekly – count 1″ chart above). Wave C formed 5 waves that topped on 15 July 2008 at 1.6038.
EUR/USD Hourly Chart (Count 1) - 25 September 2008
Since this high, we have had a dramatic drop to the low of 1.3883, which itself formed 5 waves to complete an initial wave 1. This implies that the new trend (and perhaps for the next decade or so) is down. Since the low of 15 July, we have had a corrective rally, that has quickly retraced up to a high of 1.4867, which is right in the middle of the range that I cited in the 18 September update (“I continue to expect further weakening [in the USD], perhaps enough for the EUR/USD to reach the 1.48 – 1.49 region”). The wave structure of wave C (see
“Hourly – count 1″ chart above) of wave 2 does not yet appear complete; I expect a modest rally into the 1.49 – 1.50 region before the downtrend continues.
EUR/USD Weekly Chart (Count 2) - 24 September 2008
Count 2: The EUR/USD cross rate is forming a large, multi-decade “A-B-C” correction (see “Weekly – count 2″ chart above). Wave C is underway, having formed thus far 3 waves that topped on 22 April 2008 at 1.6020.
EUR/USD Daily Chart (Count 2) - 25 September 2008
The subsequent pattern has formed an expanded flat correction, whereby wave A (see “Daily – count 2″ chart) bottomed on 8 May; wave B topped on 15 July (at 1.6038); and wave C
formed 5 clear waves into the low of 11 September.
The impulsive rally since this low lends credibility to this count, as the cross rate has moved quickly and swiftly into a rally, and sentiment indicators are a fair way away from being “overbought”. This count calls for a further “up-down-up” sequence to complete 5 waves, which would represent wave 1 of a bull market. I am looking for wave 1 to top in the 1.50 region, prior to a modest correction.
Both counts currently have equal probability. Count 1 will become the primary if the low of 11 September (1.3883) is broken under; count 2 will become the primary if the high of 15 July (1.6038) is broken above. In the middle, it’s anyone’s game.
Short term, expect a further rally in the EUR/USD into the 1.49 – 1.50 area, prior to a pullback.
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