The price for the EUR/USD pair has shown a clear downtrend since 1.3832 to the trend line which is highlighted in black on the daily chart, corresponding to the 1.3450 level. Price found support at this level after the sharp decline, and since corrective price action is evident on the lower time frames, this implies that the market will likely move lower still and break down through the trend line once the correction is complete.
According to our Elliott Wave count wave “(b)” magenta ended and the price action has begun to develop wave “(c)” magenta. The target is set at the 1.2750 area, where wave “(a)” of the same degree ended. As a conservative target for wave “(c)” we suggest the 1.2866 level, which is equivalent to 100% of the wave “(a)”, and this move can take approximately two or three months. If you trade on the daily charts we recommend taking into account the following detail, which can save you from making a poor timing choice for entry. Please note that as our Elliott Wave wave count black “i” is active and its end is forecast below the trend line, don’t confuse this break down with a short entry upon break, because it will only be the end of the first wave black “i”. Wait until wave black “ii” plays out, which will likely visit the 1.3600 area once again.
In conclusion the strategy to trade the pair this week, if you are a day trader, is to find intra-day resistance that the market will provide pointing to the 1.3420 area, then the “ii” wave will begin, and its target is set in the 1.3600 area. At the completion of the wave “ii” buckle your seat belt, because what follows is wave “iii” black that will take price to the 1.3000 area, with its strong and decisive personality. We will certainly be commenting later on how to find the end of the wave “ii” to begin taking short trades.