EUR/USD – Wave Count and Zig Zag Projection

• Day and 4H: The EUR/GBP rallied past the 0.8320 target set in the August 31st EUR/GBP update. The surge is heading up against resistance at the 61.8% retracement level at 0.8380.
• It is at 50% at the moment and also testing a declining trendline.
• Also note that the 0.8400 level is an important powerline. This is also apparent in the weekly chart below.
• The RSI in the day chart is threatening to break 60, which means it is breaking the bearish momentum.
• The RSI in the 4H chart is in the overbought area, which is a bullish sign.
• If subsequent declines fail to break below 40. The market may have turned bullish.
• However, for now, resistace is just ahead at 0.840 area. A decline from there can be targetted to 0.8250. It should not be lower because the mode has turned at least ranging if not bullish. A return to the bearish mode is confirmed with a break below 0.82 (equilibrium area of the triangle patter in 4H chart).

• Week: The weekly chart shows a bullish divergence, but if the market tops off before 0.8450 there is a negative reversal which suggests a swing projection either towards the previous low, or lower if the topping action occurs at 0.84.
• The moving averages in the weekly show that the EUR/GBP is in a long long-term bullish trend, but has been in a short-long-term bearish mode since 2009. Was the decline since 2009, a 2-swing correction?
• The second swing is projected to 0.80, and should be so because it would be a C wave. C should be equal or longer than A, unless we are in some conestiong (triangle) pattern.
• Here, it is also apparent that 0.84 is an important resistance. If you still agree with the bearish outlook towards 0.80, look for topping near 0.84. It should not break above 0.8450 (or there would be a double bottom), and a decline is conservatively to 0.8250 in the short-term, but possibly 0.80 in the intermediate term. In this scenario, you should be able to see reward to resistance at best 3:1 but likely lower.

Fan Yang
Currency Analyst
Commodity Trading Advisor

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. FXTimes 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.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.