The EUR/USD pair just printed 1.3508, and for several weeks we have noticed that price has been losing momentum which spells out potential “trend reversal”. During the uptrend that began at 1.2755, more than 77 days had elapsed until we hit the 1.3832 price, a few pips away from our final target, of course after having reached all previous targets. The price showed the Japanese candlestick pattern “Evening Star” last Monday, and in the last few days we observed that price has been in a free-fall, generating hundreds of successful trades in the lower time frames.
Elliott Wave gives us the context of the market and, we the traders need to understand this context in order to find our trades through our trading strategy. “(w,x,y)” waves denoted in black were the waves responsible for developing wave “(b)” magenta and according to the Elliott Wave count the waves are complete. Therefore the price began the reversal process; from the daily point of view the first objective is 1.3476, apparent on the trend line highlighted in black. Once this trend line is broken, that will be the first confirmation from the daily time frame that wave “(b)” magenta is complete and that a trend reversal has begun. The next target is 1.3240.
Swing Traders have been waiting a little more eagerly for this great trade and are still waiting to find their entries on the daily time frame, in order to take a short position targeting the end of the “c” wave magenta at 1.2745, which would generate close to 700 pips. For day trading, this week has been one of the best of the year, with prices on lower time frames proving very easy to trade. The down trend has been directional and steep, with steady retracements along the way, which is a very healthy trading environment for day traders.
If you are not already in a short position, we recommend day trading to be careful at the 1.3476 support level since in that area the price can correct or pause, but it is clear that the probability of seeing the price continuing bearish is huge. Have a great weekend!