The EUR/USD closed this week at 1.1760, from the last high that the price register at the resistance 1.1913 on August 2nd, the price has traveled 241 pips against the bullish trend. Will the price continue up? Or we will see it fall next week, let’s solve it from a technical point of view, start the week with our point of view and trade the EURO securely and confidently.
The Elliott waves theory study the past price to create a forecast, which helps to project the future because price patterns are repeated. Its success does not depend on the method itself (because it is quite good) but the skill that the analyst has to bring the theory to the chart is key. That is why Elliott’s wave theory is criticized as its results are different according to the analyst who works on it.
Elliott Wave Four Hour Chart EUR/USD
In the four-hour chart, we find the Wave “(3)” orange degree, that was able to reach the Fibonacci projection 200% (1.1904), magically the price stopped right at this level and showed a reverse. This objective comes by measuring the wave “(1)” orange which covers a distance of about 212 PIPs (1.1370-1.1583), then we project this distance from the end of the Wave “(2)” Orange that ended at 1.1479.
When the fourth wave started, we had some technical clues to conclude that the Wave “(4)” Orange degree, should retrace enough to reach the 1.1583 and not more than the 1.1479 level, since we are facing an ending diagonal wave inside the fifth wave noted in red.
Having the hint about being inside in a diagonal wave, we were able to short during the corrective wave and achieved during the wave “A” green 30 pips.
At the end of the Wave “(B)” green the Wave “(C)” started, the wave in charge of carrying the price to the minimum objective at 1.1583. We still have time to trade short and take advantage of the bearish cycle. Once the wave “ii” blue ends and shows the reverse signal, it will be possible to enter short and target the 1.1583, and we hope that the signal will activate next week, near the 1.1780/50. The trick to achieving success in the trade is to apply a high probability strategy and validate the end of wave two.
Because it is a wave four within a diagonal structure, the fourth wave will retrace a significant percentage compared to wave three, in this case, the 78.6% (1.1517) retrace called our attention because it is within the expected area that wave four will end.
During a non-diagonal wave usually, the fourth wave stops at 38.2%, when the wave “(4)” orange finishes, the strategy will be to buy and close shorts, the bullish objective estimated by using the Fibonacci projection at 1.2029 or 127.2% for the wave “III” black.
We recommend next week to find a short trade and once the corrective wave ends buy, hold the trade and target 1.2029. Do not forget to validate the end of the waves using other technical analysis tools, keep the risk under control and be consistent with your entry strategy, happy weekend.