The EUR has rallied so strongly rallied against the GBP since mid-April but there is a possibility that a bearish move is imminent. A move that could give 300-500 Pips. The following give clues on how to take this opportunity as price hinges toward two corrective patterns based on 26 May EUR GBP Elliott wave analysis.
26 May, AtoZForex - The Elliott wave theory sometimes can leave us with more to ponder on as it tries to explain market behavior more extensively. Price could sometimes be at the verge of completing two patterns i.e having the early build-up of two different patterns. Let's see how to go about it. We will be looking at EURGBP from two scenarios.
26 May EUR GBP Elliott wave analysis: FIRST SCENARIO
EURGBP Elliott wave analysis, Daily (click to zoom)
From August 2015 to October 2016, about a year, price rallied in a clear impulse wave. It later dipped as one would have expected. A 3-wave dip is often seen in this case based on Elliott wave theory. The A-wave of the dip completed by December 2016 and price has been in side way correction since. Wave C is the next big opportunity and its downside. Flats and Triangles are the two sideway corrective patterns price could complete in this case. This scenario looks at a triangle wave B. Once this pattern is complete as shown above, a large dip will be expected downside. Is there a chance to see a short opportunity in to take the sub-wave d for intraday traders. The chart below gives clues.
EURGBP Elliott wave analysis, H2 (click to zoom)
Price is just below the a-c resistance trendline. The chart above shows an a-b-c pattern that could complete the c-wave of the triangle. Wave (c) of the structure above is about completing an impulse wave. If price stays below 0.8735 and breaks below the channel line and 0.86, there will be a short term bearish opportunity downside. This scenario will be invalid if price rallies above 0.8735 to pave way for the second scenario.
26 May EUR GBP Elliott wave analysis: SECOND SCENARIO
EURGBP Elliott wave analysis, Daily (click to zoom)
If the rally continues above 0.8735 toward 0.88, there is a high likelihood of a flat pattern to complete wave B. This will be a complete setup and price is expected to move more strongly downside than the first scenario. The chart below shows the sub-wave of the last stages of this scenario.
EURGBP Elliott wave analysis, H2 (click to zoom)
If price stays above 0.86 and rallies further toward 0.88 as shown above. a breakout will be expected to trigger the long term bearish correction to continue.
The two scenarios point downward at different levels. Price will validate one and invalidate the other. A break above 0.88 strongly is not very much likely but a possibility that will invalidate the two scenarios. More updates will come later.
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