EURUSD had extended its rally towards 1.2171 highs on Friday and has hit a shallow high around 1.2177 in early trade today. The rally from 1.1704 has exceeded fibonacci 0.618 retracement of earlier drop between 1.2350 and 1.1704 levels respectively.
EURUSD wave structure still remains constructive for bears to take control from here. The earlier drop between 1.2350 and 1.1704 unfolded into 5 waves labelled as Waves 1 through 5 on the above chart. A potential leading diagonal Wave (1) could be in place.
The subsequent rally since 1.1704 might have unfolded as a zigzag correction. The sub waves are labelled as a-b-c, terminating potential Wave (2). Please note that fibonacci 0.786 retracement is seen passing through 1.2217 levels and probability remains for a test before reversal lower.
Alternately, a sustained rally above 1.2230 mark would threaten to push above 1.2350 levels and also change the proposed bearish structure. At the moment, we shall keep the preferred count as lower against 1.2350 levels.
Immediate support is now seen at 1.1987 mark and a break below that is required to confirm a top in place. Prices have raised above the trend line resistance for now, and it would be interesting to see how the daily chart unfolds, going forward.
Most traders might still continue to hold short positions against 1.2350 highs. Watch out for an acceleration lower on a break below 1.1987 handle, going forward.
Finacademy Technical Team
Gold dropped to $1770 mark on Tuesday before finding some support. The yellow metal is still testing its intermediate trend line support connecting $1721 and $1758 levels respectively.
The US dollar index carves a meaningful top around 96.88 mark over the last week. The index reversed sharply on Friday confirming a bearish Evening Star candlestick pattern on the daily chart.
EURUSD has carved a potential bottom at 1.1186 mark over the last week. EURO bulls have managed to stage a 150 pip rally thereafter, before pulling back.