On the 21st of June we witnessed a rather forceful reversal from the mild downtrend we were experiencing with the formation of an hourly uptrend that continued the following day. The price action reached DR2 ~1.1632 on Thursday from day low ~1.1507, which amounted to ~125 pips gain for the EURO and ended the day by landing on DR1 ~1.1601. The rally continued on Friday but with greater swings making a 0.618 Fibo retracement (low: 1.1600, high: 1.1674) and closing the day again above DR1 ~1.1656.
The key information we can take out of this event is, first, that the first rally was a lot wider than the second (125/74 pips) and the retracement tinier. Second, the closing price on Friday was high enough to give clues of a possible continuation of the trend. Third, besides DR1 another factor of resistance was the weekly pivot ~1.1666 which might have been used by many for a fakeout. Fourth, it was after all Friday with German Manufacturing PMI as the only key event of the day which essentially was lower than expected.
Important to be mentioned is that a bullish harmonic pattern or lookalike was created on the 15m chart which has propelled the price to DR1 again at the end of the day where it stalled for 3 hours (WP-DR1).
The conclusion is that after two rallies, it will be harder to project a precise direction, but what can be speculated on is possible successful entries for either buy or sell orders. If the price was to go up then bulls could look for entering longs around ~1.1674 with tight SLs which would be as high as previous higher high within the uptrend channel. The bears, on the other hand, could enter shorts below 1.1640 which is a dozen of pips of away from the lower limit of downtrend channel (and will be growing wider with each hour on the move).
The bigger picture lies in whether the ~1.1720 resistance (which is a ~0.236 Fibo daily retracement, high: ~1.2413, low: ~1.1506) will hold in the event the price makes a third rally. According to EW cardinal rules, however, wave 3 cannot be the shortest wave, hence if it is shorter than wave 1, shouldn't wave 5 be shorter?
The bottom line, therefore, is that TP1 for longs would be ~1.1685 which is ~68 pips away from previous lower low (~1.1617) and in the zone of DR1 on Monday. Let's keep an eye on data release, who knows maybe something reverses the uptrend and leads to a downward move of 200-300 pips?
The key information we can take out of this event is, first, that the first rally was a lot wider than the second (125/74 pips) and the retracement tinier. Second, the closing price on Friday was high enough to give clues of a possible continuation of the trend. Third, besides DR1 another factor of resistance was the weekly pivot ~1.1666 which might have been used by many for a fakeout. Fourth, it was after all Friday with German Manufacturing PMI as the only key event of the day which essentially was lower than expected.
Important to be mentioned is that a bullish harmonic pattern or lookalike was created on the 15m chart which has propelled the price to DR1 again at the end of the day where it stalled for 3 hours (WP-DR1).
The conclusion is that after two rallies, it will be harder to project a precise direction, but what can be speculated on is possible successful entries for either buy or sell orders. If the price was to go up then bulls could look for entering longs around ~1.1674 with tight SLs which would be as high as previous higher high within the uptrend channel. The bears, on the other hand, could enter shorts below 1.1640 which is a dozen of pips of away from the lower limit of downtrend channel (and will be growing wider with each hour on the move).
The bigger picture lies in whether the ~1.1720 resistance (which is a ~0.236 Fibo daily retracement, high: ~1.2413, low: ~1.1506) will hold in the event the price makes a third rally. According to EW cardinal rules, however, wave 3 cannot be the shortest wave, hence if it is shorter than wave 1, shouldn't wave 5 be shorter?
The bottom line, therefore, is that TP1 for longs would be ~1.1685 which is ~68 pips away from previous lower low (~1.1617) and in the zone of DR1 on Monday. Let's keep an eye on data release, who knows maybe something reverses the uptrend and leads to a downward move of 200-300 pips?
Comment:
Also, I would like to add in support of the hourly uptrend that RSI is at ~60, while ADX is at ~35. There are no divergences on the 30m/1h charts. But the reason why any subsequent moves should fade below 1.1720 is that the daily downtrend channel upper limit grows lower and lower.
Comment:
TP1 for buy orders 1.1674 achieved 1.1685. Let's see if we make reversal to daily pivot ~1.1642 or DS1 ~1.1611
Comment:
CORRECTION: The bears, on the other hand, could enter shorts below 1.1640 which is a dozen of pips of away from the lower limit of downtrend channel. (UPTREND CHANNEL)*
