EUR/GBP Elliott Wave Analysis

EUR/GBP – 0.8372

EUR/GBP – Wave (A) from 0.9805 top ended at 0.8400 and (B) ended at 0.9413

Although the single currency has rebounded after finding good support at 0.8202, if our view that wave 4 correction has ended at 0.8532 is correct, upside should be limited to 0.8410/20 and bring another decline later. Break of said support at 0.8202 would add credence to this view and bring retest of 0.8143, however, a daily close below there is needed to retain bearishness and bring further weakness to 0.8100 in wave 5, then retest of recent low at 0.8067 and later test of psychological support at 0.8000.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major A-B-C correction is unfolding with A: 0.8637, B: 0.9491 and wave C is a 5-waver with 1: 0.9158, 2: 0.9418, extended wave 3 ended at 0.8576 followed by wave 4 at 0.8868. The wave 5 has ended at 0.8400, this also mark the end of larger degree wave C as well as (A).

The rebound from there to 0.9413 is the wave (B) which followed by wave (C) and the break-down is 1: 0.8603, 2: 0.9150 and wave 3 has possibly ended at 0.8067 and a leg of wave 4 correction has met indicated upside target at 0.8481 and the retreat from 0.8532 suggests A leg has ended and B leg may bring weakness to aforesaid downside target but 0.8150 should contain downside. Looking ahead, a daily close below 0.8100 would signal the wave 5 of (C) is underway and bring retest of 0.8067, then psychological support at 0.8000 and possibly to 0.7900 but reckon 0.7744 (50% Fibonacci retracement of 0.5682 to 0.9805) would hold.

On the upside, above 0.8490/00 would prolong consolidation and risk test of 0.8532 but only break there would signal c leg of wave 4 is underway for stronger recovery, however, price should falter below wave 1 bottom at 0.8603.

Recommendation: Hold short entered at 0.8400 for 0.8150 with stop above 0.8490.

Euro's long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.
Therefore major correction has commenced from 0.9805 and weakness to 0.8230 (38.2% Fibonacci retracement of 0.5682 to 0.9805) would be seen first, then to 0.8000 and later 0.7744 (50% Fibonacci retracement).