First of all, current sentiment readings are clocking in at -1.79. This means 64% of EURUSD retail traders are currently short. SSI is a contrarian tool which suggests further gains are likely. This is because these traders are already positioned in the market so they become a future pool of buyers.
Now, looking at the picture, the higher probability counts are noted in green text box on the chart. That means on June 28, prices completed red wave (c) which is an ending wave to the downside. That leaves a simple 5 wave move higher that likely breaks 1.1465. That also suggests we may be beginning red wave ( iii ) of that 5 wave move now. Third waves tend to be the longest and strongest and the Greek vote could provide the rocket fuel .
For those unfamiliar with EW and if you wish to see the idealized pattern at play, view this link and place the June 28 EURUSD low at the start of the blue line higher. In essence, the “you are here” dot would be starting the climb up the blue line.
analysis is probabilistic. We never know for certain what is going to happen so it is certainly possible for prices to drop hard on Sunday. I have those counts de-emphasized and listed in the red text box. De-emphasized means they are lower probability in my opinion, but still possible.
Bottom line, my bias is and 1.0815 is the key level which would turn me . If you missed the long entry in the 1.09-1.10 area we’ve discussed for the past couple weeks, the closer a trade can be entered near 1.0815, the better risk to reward ratio.
On Monday’s weekly US Opening Bell webinar, we’ll update the action from Sunday and eliminate counts as needed to see what the higher probability move is going forward. You are more than welcome to join with a free 14 day registration to the DailyFX Plus Live Classroom:
The webinar is held at 9:30a ET (New York time) and the archive will be made available afterwards at the same spot.
In closing, keep in mind prices are likely to open a significant distance away from where they close today. I don’t know if the gap would be higher or lower so there is risk of getting slipped on a stop loss or stop entry on the Sunday open. If you hold a trade over the weekend, make sure it is small so a slipped trade doesn’t eat too much of your equity.
I would be interested in hearing from other EW’ers what your preferred count is. Good luck!
To your other question below about the triangle, at the time of the post, there were 2 interpretations I was following (triangle or expanded flat). Since prices rejected hard at 1.14 and have found support at 1.09 (so far), I think it is the (b) wave of a circle 'b'. The bump higher from June 17-18 doesn't convince me to be the circle 'c' wave that would finalize the up move for these reasons:
1) Time and distance of the proposed circle 'c' doesn't match up with circle 'a'
2) I have a difficult time counting 5 waves up in the June 17-18 move
Since then, the price action since June 18 is not crystal clear and is quite choppy. Taking a step back, we're still above 1.0815 so bullish bias is warranted as nothing impulsive lower appears at this point. Does that help clarify?
The reason you are having difficulty seeing it in your mind is that the proposed 5 wave move higher is 1 degree of trend higher than the circle 'c' wave sell off. Ideally, it labeling the first 5 wave move in red and the ensuring 5 wave move higher in green. Realistically, on the chart, they might look similar.
That is why you may hear me say things like "one or 2 more pokes"...it is sorting through the degrees of trend which are regularly off in analysis at smaller time frames.
Great question - I had the exact same one when I was learning EW.
Leading diagonals take place in the 'A' wave of an A-B-C move or in the '1' wave of a 1-2-3-4-5 move. So if we hit 1.1110-1.1160 overnight, that furthers the bullish case.