Because we have yet to break structure, I won’t touch on the long option, but the short option is playing this current move as a 2618 trade. We have already entered the killzone starting at 1.1120’s and at this point I would be dialing down to your lower timeframes and looking for an entry reason.
IF this 2618 does complete and rollover, it would also be the “C” leg of a potential pattern. You guys know how I feel about the “aggressive C” trade (BAD! BAD! BAD!) but this would be one that actually makes sense, only because you have a valid reason to enter.
I’m feeling horrible today as I’ve caught a cold from somewhere, but with A LOT on my trading radar (Syndicate members, take a look at the tradefloor this morning) I don’t want to miss what could be a day ripe with opportunity.
(If you’re unfamiliar with the 2618 trade, the free training is on our website under the “Learn to Trade” tab)
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Looking at the inverse correlation with the strength of the USDOLLAR, there seems to be nothing magical about the EURO or even the EURUSD pair. The EURUSD is largely at the mercy of the USDollar. And the DAX or example is nearly as well inversely correlated to the DAX (GER30). So - speculations on the EURUSD (and the DAX) rests heavily on the USDOLLAR? If one is betting which ever direction on EURUSD (or the DAX) one might as well do same on the USDOLLAR?
I've found out that that the USDOLLAR index is a composite index comparing the USD against several other currencies (I'm mindful that there is no way to say how strong USD is unless compared to another currency or currencies). That in itself makes USDOLLAR index a robust measure of the strength of the USD. However USDOLLAR is weighted by a geometric mean to 57.6% by the EURO itself (along with 5 other currencies). https://en.wikipedia.org/wiki/U.S._Dollar_Index and http://www.investopedia.com/terms/u/usdx.asp
If the denominator in the EURUSD is the USD strength, then when that denominator increases in size, the result of the EURUSD fraction, must be reduced. The converse is true for the numerator.
In a sense, the weighting of USDOLLAR index by the EURO itself, suggests that it is an inverse, 'mini EURUSD' i.e. USD v EURO (that 57.6% weighting). I imagine that explains the near mirror image of USDOLLAR to EURUSD? The weekly chart captioned in this post shows only one brief period lacking inverse correlation.
The key point I started off with was the apparent correlation between the form and flow of the EURUSD against USDOLLAR (and I included the DAX which very much mirrors the EURUSD). The question is essentially whether everybody else is seeing what I'm seeing as I described it. I'm a bit worried about me in case I'm not seeing what's on the charts properly. I'm seeing patterns that are mirror images of each other for the respective instruments mentioned. If everybody is is seeing what I'm seeing, then it matters not what the underlying mechanisms are. The key issue is that the inverse patterns exist, are closely related and are real.
I'm also looking at UJ and UJ is very stiff right now. It might have hit it's bottom at 123.35, but it is acting very weird. You'll see a lot of gaps on the m5. It really hasn't double bottomed yet so it makes me nervous a bit, there might be a chance that EU could go up further. It'll be exciting to see the activity later on today when Asia opens and Europe opens.
Keeping in mind that ABCD is a complex correction is essential to understand that advanced patterns are trend continuation patterns. But they also work good as consolidation and counter-trend patterns (not as good but still enough to have a positive expectancy).
This is why I say traders need to understand legs.