EURGBP Hot Spot -- On top of several wave relationships

FX:EURGBP   Euro Fx/British Pound
1289 16 33
EURGBP             appears to be finishing a move lower as the pair plows into a cluster of wave relationships. It appears to be close to finishing wave 4 (w-x-y). That wave count suggests a 5 wave move higher that could reach .8150.

When you draw a trend line connecting the end of wave 1 & 3, then duplicate that line to the end of wave 2 to obtain an approximate area for wave 4.

Also, if you draw a trend channel within circle wave 'y' (grey trend line ), the equal wave measurement appears near 7560 which was tagged Wednesday morning.

EURGBP             may bounce around here a little, but the point is this move lower appears mature. The top of wave 1 is the risk to the trade, so a stop loss could be placed near .7490.

Couple this idea with the EURUSD             post from earlier this week which also appears to have some bullish potential.

On June 1, a new contest for FXCM             mini accounts begins. Check out the current month standing here.

There are a lot of Elliott Wave relationships taking place on this pair. I welcome your questions on EW.

Best of luck!
Comment: EURGBP is approaching the grey trend line. ECB hits the wires tomorrow morning. The move from May 30 looks impulsive. Therefore, the grey trend line may provide temporary resistance, but considering a buy the dip strategy.

Comment: Top side attack on the trend channel. This 7750 low from today is another hot spot to define for bulls. Positive risk to reward ratio from near current levels.

Hi Jeremy, great article as usual, though how do you feel about the possibility of the wave analysis competing with what looks like a 'confirmed' for want of better expression Head and Shoulders, which would possibly be indicating further depreciation in EUR/GBP until .7340ish? I often find these very different possibilities complicated? I appreciate in the end price will tell us one way or the other, just interested in your view? Best regards.
+1 Reply
marcus123 mike.church.963
we do have some daily bearish divergence at 0.7563; which coincides with being the top trendline of a daily/weekly channel; so a nice bounce point...and then perhaps the continued move down with the H&S?
marcus123 marcus123
meant bullish divergence; and your analysis was spot on, it took off. nice tradde
JWagnerFXTrader PRO mike.church.963
Hi Mike - valid question. From my perspective, I'm looking through the lense of Elliott Wave first, then other technical analysis next. There are places in a wave count where a head and shoulders outcome fits into EW. For example and generally speaking, LS could be wave 3, head is wave 5, right shoulder is wave A of the ensuing correction or wave 1 of the new trend down. Both of those examples would point to additional weakness.

In the EURGBP example above, I don't know if prices are going to bounce higher or fall off a cliff. However, there was a hot spot of support and higher probability bullish outcomes. On the chart above, waves 1-2-3 are fairly straight forward. Could it be an A-B-C zigzag? Possible. It would imply weakness which we got. However, the weakness beginning Feb 11 never really morphed into 5 waves down...it continued to chop around sideways and moved lower in baskets of 3 waves which is corrective.

I can't fit wave 'X' as a 5 wave motive wave. Therefore, even if the correction continues, the equal wave from April 7 to May 25 suggests pressure to the upside.

With all of that said (and with ECB stepping up to the podium tomorrow morning), where do we stand now? A break that holds above the trend channel is significant. However, we have short term 5 waves up that may need a partial retracement to correct on. That correction would need to hold above 7572 to keep the wave count above alive.

Likewise, GBPUSD is at temporary support so I wouldn't be surprised to see it trade to 1.45 which may drag EURGBP lower a little.
+1 Reply
mike.church.963 JWagnerFXTrader
Hey Jeremy, thanks for taking the time to respond to my question and for providing a further simple though well explained point of view, it is great to get a good understanding of your perspective. I'd consider myself more of John J Murphy TA person up to this point :) and tend to focus more on straight TA patterns than EW though I appreciate the two are intrinsically linked, as you suggest a break above the declining corrective channel and close above the neckline would signal a failure of the H&S, I obviously can see the 5 waves up from the ABCD which obviously is motive and as SSI is now so heavily tilt with people short, this makes for a prime breakout trade! I'll watch with interest and try and pick and good entry.... thanks again.
+1 Reply
JWagnerFXTrader PRO mike.church.963
You bring up an excellent point how the break of the channel coincides with a break above the neckline. The impulsive move higher took about 2 days, so we are still in the early stages of a corrective set back since the correction is about 18 hours old. The previous wave 4 near 7680 is an area we can look for a potential reaction higher. If this takes place in the next 24-48 hours then it may present an opportunity for the market to gather its legs and attempt a break higher.
Thank you!
Your welcome Learner...good luck.
in my opinion, this a long term buy position if everything goes well, there is considerable weekness in the Pound at the moment and if you closely with 2-3 weeks back, there is a double top formation in the 4 hour time frame for gbpusd, so we buy this
Yes, I agree GBPUSD is still structurally weak, though it may trade up to 1.45 before continuing that weakness. Today's low in GBPUSD tagged a 1.618 extension which could be a small degree 3rd wave or c wave. Either way, the higher probability move is pressure back up to 1.45.

Agree on the direction but count was unclear to me (based my wave 3 on weekly structure and MACD top...):
EUR/GBP Update: Long from AB=CD and possible Cypher C

Close to down trendline now, maybe tomorrow..., curious to see if it breaks or bounces... Also back at H&S neckline...

Possible wave 5 (if my bullish count is correct) and/or cypher if we break to the upside..., to the downside possible 3 drives pattern and/or wedge...
That's how I see it for now.
Ok - so that move from neckline to your wave 3 I struggled with a lot. I can't stuff a 5 wave motive into it. Therefore, when what is obvious, it must some some type of '3'. I'm clocking it as a double zigzag. Anyway, I have wave 3 ending where your left shoulder is making everything to the right a correction.
KVE JWagnerFXTrader
You're right about that last up move to my head, it was also unclear to me on this TF..., so I figured I'd just take the higher TF most likely top, also because the correction needed to be more substantial than what we saw within the H&S pattern, based on the weekly I would say either ABC and wave 4 finished (chanelling suggests that but is often wrong...) and we get a 5 now or it was just ABC of W... and we get a large flat or triangle (wave 2 was sharp...) with a 5 much further in time (possible harmonic pattern...):

But that's just my thoughts, as said, technically your conclusion is probably the only one that fits the structure best!

Allthough, an alternate count for the daily TF is leading diagonal (1) of circled 3..., but that looks far fetched.... and would mean a massive move is to come...

Anyway, thanks alot for your reply, I still have alot to learn so it's great to share idea's like this!
Regarding your comment "and we get a 5 now or it was just ABC of W"

I think it is wave 5 now because when you draw a trend line connecting the top of waves 1 & 3, then duplicate that line to the end of wave 2. Ok, so price action pierced that duplicated trend line so it is behaving like a wave 4. If price was supported and didn't quite reach the trend line, the it elevates the potential that the sell off was the first of a complex correction. Additionally, the move higher is appearing like a motive wave which is what we need in wave 5 as well.
KVE JWagnerFXTrader
Thanks, supports the wave 5 idea then, as in my initial weekly count! This recent up move indeed looks motive. We broke above the ABC trendline also!
Price now back above the MA(100) as well and well on the way to the upper BB...

I'll be watching the possible Cypher around 0.8000 now...
Thank you again!
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