- 61.8% retracement of 2001-2008 Upswing;
- 100% projection of AB Leg;
- 127% expansion of BC Leg;
- Mid-2003 High and early 2006 Low.
Whether or not this scenario will develop will heavily depend on the structure of the potential CD Leg. If it starts evolving as an Impulse Wave, then the probabilities will increase that this scenario will be realized. On the other hand, if the CD Leg starts evolving as a Corrective Wave, then the odds will favor the following Scenario 2.
EUR/USD Monthly Scenario 2 – Higher Bearish ABCD
This scenario suggests a much shorter initial Corrective Structure decline in the BC Leg with potential for subsequent CD Leg upswing with a broad target zone between 1.600 and 1.700. We will be able to narrow the target zone if and when the BC Leg will complete itself and its Wave Structure becomes apparent.
So far this scenario is supported by a clear 5 Wave Impulse structure of the AB Leg, which is shown on the following Daily chart of EUR/USD March-December 2009 advance. The chances are that since the AB Leg was an Impulse Wave, then BC could be corrective and CD could yet again be an Impulse Wave – thus we arrive at Scenario 2.
EUR/USD Daily Zoom of Scenario 2 – Elliot Wave Count
On this chart we see very clearly multiple degree 5 Wave Impulse Structures. It may appear that the highest degree Fifth wave is the longest, but it is a visual illusion. If you actually measure the size of each wave, you will see that Wave 3 is not only longer but also steeper than Wave 5.
EUR/USD Daily Zoom of Scenario 2 – Fibonacci Levels
If we expand on the logic of scenario 2, we will see that the lesser degree AB corrective leg is nearing its completion, since the EUR/USD has already tagged the 61.8% Retracement level of Wave 5. The pair can go lower, and if this happens, we will adjust our outlook, but if it bounces from these levels, a possible target for a corrective rally lies between the 1.4800 and 1.4950 levels with a subsequent decline target around 1.3800. Once again, the target zones can be fine-tuned after the size and respective wave structures of the AB, BC and CD Legs become apparent.
Nugzar Dzodzuashvili
Chief Market Analyst
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. CMS will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.
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All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.
