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Forex FOREX PRO WEEKLY, May 27 - 31, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, May 25, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    EUR is coming to very important moment as from technical point of view (we already see this on charts) as fundamentally. Started elections in EU Parliament could change the political establishment in EU. Euro-sceptic slowly but stubbornly takes more power as inside the countries as in EU arena. Currently, the major question around this elections is how valuable euro-skeptics group will be in Parliament. We will get answer next week, but right now it seems that results are surprising a bit.

    In recent few years more and more people and politicians, political parties are not satisfied Brussels policy. Indeed, the countries inside EU do not have independence - Brussels shapes expenses structure, migration policy and other major things that put Brussels decision over national government of particular EU country. And this problem becomes vexed.

    This elections could change political balance of EU, which definitely makes impact on EUR value. So, we expect that this will be not ordinary elections. Technical picture on EUR/USD gives some signs of possible drastic turn. Although time horizons are not clear yet, but we have technical signals of changing situation.

    Reuters releases good article on this subject, brings more details on the same problem:

    Expected gains for populist eurosceptic parties in this week’s European Parliament elections could prompt a shift in the political balance of power in leading member states and stall moves towards deeper economic integration.

    Voting across the 28-nation EU runs from Thursday till Sunday and eurosceptic parties are forecast to do well, including in the three biggest countries of the euro zone, Germany, France and Italy.

    An exit poll in the Netherlands, which along with Britain voted on Thursday, showed mainstream pro-EU parties performing surprisingly well but analysts warned against reading too much into the Dutch results.

    “Concerns are high that the center ground continues to fragment (across the EU) and that populists succeed in sufficient numbers to derail further European integration,” ING bank said in a note.

    The EU Parliament has little direct say on euro zone economic policy but an assembly dominated by eurosceptics could hamper moves to deepen integration of the single currency area and make it more resilient to future shocks through the creation of a special budget and euro zone-wide deposit guarantee scheme.

    GERMANY
    Polls show that in Germany, the euro zone’s biggest economy, the Social Democrats (SPD), junior coalition partner of Chancellor Angela Merkel’s conservatives, is likely to win fewer votes than in the 2017 national election, when it recorded the worst result in its post-war history.

    If the SPD also suffers defeat on Sunday, as expected, in local elections in Bremen where the party has ruled for 73 years, it could embolden those who want to pull out of Merkel’s government and rebuild their party’s popularity in opposition.

    That could increase Berlin’s reluctance to accept any far-reaching euro zone reforms such as a substantial euro zone budget to stabilize economies since the SPD is seen as more enthusiastic towards euro zone integration than Merkel’s party.

    However, some euro zone officials said that even if the SPD were to pull out, the gap could be filled by the Greens, the most pro-integration German party, who are seen gaining strongly in the EU election.

    FRANCE AND ITALY
    In France, polls show Marine Le Pen’s eurosceptic National Rally could win more support in the election than President Emmanuel Macron’s strongly pro-EU Republic on the Move party, which would be a big blow to a president already weakened by six months of “yellow vests” protests.

    Macron is the main champion of euro zone integration with the boldest ideas on a joint budget, but defeat by Le Pen in Sunday’s vote could weaken his ability to push through reforms at a time when Germany is becoming more resistant to change.

    In a further likely blow to integration, in Italy Matteo Salvini’s far-right League is tipped to win more than 30% of the vote on Sunday, according to polls.

    If that happens, Salvini could push for early national elections to get rid of his 5-Star coalition partner and rule alone or in coalition with Forza Italia, euro zone officials said. Salvini denied on Wednesday he would do that.

    Strong support for the League would also give Salvini ammunition for another confrontation with the European Commission over fiscal policy after an unprecedented clash in the second half of 2018 when Rome refused to cut its budget deficit and public debt as required.

    Salvini has been calling for a review of the EU’s budget rules so that Italy could cut taxes, even though its deficit and huge debt are on the rise.

    Italy’s loose fiscal policy is already the main reason why Germany now rejects a European Deposit Insurance Scheme (EDIS), fearing German depositors would have to bail out Italians if Italian banks got into trouble.

    “For Germany, Italy is the real problem when discussing EDIS and this is also the reason why there is no progress at all with EDIS,” one senior euro zone official said. “If Salvini wins I am convinced that there will never be a full mutualized EDIS.”

    Italy has proportionally the second highest public debt in the euro zone after Greece at above 130 percent of GDP, an almost stagnant economy and a rapidly falling primary budget surplus, a measure which excludes interest payments.

    Euro zone officials said Salvini’s plans for further fiscal loosening could increase the threat of a debt crisis in Italy and make Germany and its northern allies even more reluctant to agree that the nascent euro zone budget, due to be created from 2021, should be used to stabilize economies under stress or be of any meaningful size.

    Some concern stands around the dollar as well. In general we think that currently the negativity is artificially ballooned around US economy and ongoing political and economical process as around China negotiations as around US domestic events. In reality overall situation is not as bad, as it shows in media space. US economy shows moderate performance, good employment and moderate consumption. Real estate market also looks acceptable. But it gradual slow down could continue and overall performance might become not enough for rate increase.

    Here is what Fathom consulting tells on US sentiment right now. We remind you, that - "In contrast to investors in US money markets, who believe the Fed Funds rate is more likely to fall this year than to rise, Fathom expects one interest rate rise in the second half of this year, and a second one in the first half of next year, as US growth remains above trend":

    After a small uptick in March, Fathom’s US Economic Sentiment Indicator (US ESI) declined again last month, touching a 29-month low of 3.8%. We have long argued that the gap between sentiment and real GDP growth would close – with the former likely to decline and the latter likely to increase. By and large this has taken place, albeit at a slower pace than we initially expected. Looking ahead, it would not be a surprise if both GDP growth and sentiment continued to tick down this year and into 2020, as the effects of the large fiscal stimulus package fade and the economy runs into capacity constraints. Last week’s economic data paint a mixed picture at the start of Q2: housing data – including starts, and the NAHB survey – suggest that the last year’s wobble in the housing market has stabilised; manufacturing data for April were soft; retail sales may have slipped in April, but this followed a very strong reading in March.

    [​IMG]

    As Reuters reports, this week - the dollar edged away from two-year highs on Friday after weak U.S. manufacturing activity data sparked worries that the trade conflict with China may hurt the world’s largest economy and affect the currency’s safe-haven status.

    The fall followed overnight data showing manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in U.S. economic growth was under way.

    The orders for U.S.-made capital goods fell, further evidence that manufacturing and the broader economy are slowing, due in part to the U.S.-China trade dispute.

    The weaker-than-expected data, a closely watched proxy for business spending plans, drove the dollar lower and added to a fall which began Thursday following a report that showed manufacturing activity hit its lowest level in almost a decade in May.

    Taken together, the reports suggested a sharp slowdown in U.S. economic growth is under way, which could affect the dollar’s safe-haven status.

    Up to now, the bulk of the pain from the trade war has been felt in Asia, with economies from Singapore to Thailand all posting poor numbers.

    Some analysts initially believed that a trade war would be a boon for the U.S. dollar - both because the currency serves as a safe haven in times of uncertainty and because the United States was likely to be hurt the least, but that has not proven to be true.

    “The IMF suggests that U.S. import tariffs are mainly paid for by U.S. companies, depressing their profit margins. Hence, it should not be surprising to see U.S. capex plans being cut radically, which should soon translate into moderating labor market conditions,” wrote Hans Redeker, global head of foreign exchange strategy at Morgan Stanley.

    China on Friday denounced U.S. Secretary of State Mike Pompeo for fabricating rumors after he said the chief executive of China’s Huawei Technologies Co Ltd was lying about his company’s ties to the Beijing government.

    “Lot of people for good reasons thought trade wars may be U.S. dollar-positive and other countries cannot retaliate,” said Commerzbank FX strategist Ulrich Leuchtmann.

    “But in reality, it’s more difficult. This very disappointing PMI data and other factors like the Huawei story are all creating stress for the U.S. economy and derailing sentiment.”

    President Donald Trump said on Thursday that U.S. complaints against Huawei Technologies Co Ltd might be resolved within the framework of a U.S.-China trade deal, while at the same time calling the Chinese telecommunications giant “very dangerous”.

    Escalating trade tensions and weak data have fuelled rate cut expectations from the Fed. Money markets broadly expect one rate cut by October followed by another by January 2020.

    “In the current circumstances, we strongly suspect that further escalation in protectionism will lead the Fed to consider easing policy,” wrote Michael Hanson, head of global macro strategy at TD Securities. “Increases in inflation should be relatively short-lived, while the hit to growth could be more persistent.”

    Dollar weakness also helped boost sterling, though the British currency extended its rally after UK Prime Minister Theresa May said on Friday she would quit, setting up a contest that will bring a new prime minister to power who could pursue a cleaner break with the European Union.

    The euro also benefited from dollar weakness, and might have also been helped by the Dutch part of the EU parliamentary elections.

    An exit poll showed the Labour party of European Commissioner Frans Timmermans won a surprise victory over a Eurosceptic challenger who had been topping opinion surveys.

    The euro has been pinned lower in recent weeks by the prospect of Eurosceptic parties across the continent performing well in the elections.

    Thus, we study major driving factors that should dominate over market in nearest few weeks. Although above we've read that analysts look with doubts on dominant role of US in tariffs war, I still support this view. This is war of attrition, and US has significantly greater margin of safety and still controls global trade and has wider trading partners diversification, controls major part of Middle East oil production with UAE and S. Arabia. US definitely hurts, but China could get fatal blow. This is my personal view. Besides, US just can't chicken out already. In this case the whole world will see that US is weak at the knees. As D. Trump intends to play the same tariffs game with EU - US can't pull the back pedal in tariffs war with China. Otherwise, the game with EU will be lost in advance.

    And the last one - CFTC report. This week it doesn't show big changes in net speculative position. It stands bearish and almost at the same levels:
    upload_2019-5-25_13-46-25.
    Source: cftc.gov
    Charting by Investing.com

    Technical analysis
    Monthly

    Now we're coming to most interesting things - what charts tell us. In the beginning of the report, I put link to Stag analysis (is somebody has not seen it). He suggests that EUR stands at important point as direction should be estimated in nearest time:
    Stag's EUR update
    Short term view coincides with what we've said on Friday - as we also talked about waiting for moderate retracement for long entry. Stag suggests that it could the rally if, EUR breaks 1.1325 area. This is EW view.

    We try to do cross-market analysis with dollar index and see what is going on longer-term picture, to understand where we are and what to do next. In fact, we already did this earlier, but I do not want to search for reports in old threads. In fact, our long-term Dollar index analysis is completed:

    Long-term upside rally has started with "222" Buy and there also was quarterly bullish grabber, right at "C" point - we've talked about it in our long-term forecast 8 years ago. Rally has reached XOP target and index has formed bearish reversal swing right after it, as price has dropped below the lows of previous upside swing.

    Following market mechanics logic - now we see the end of impulse upside action, which is deep upside retracement of reversal swing. This is common situation - when market stands in long-term rally, it needs to fade existent bullish momentum first, before reversal, and the upside swing that we see here is precisely this fading bullish momentum. Rule of thumb tells - "buy first AB-CD retracement after reversal swing", telling that it should be deep. Here we do not have AB-CD shape but it stands deep.
    dxy_m_27_05_19.

    Monthly chart tells that downside reversal should be somewhere right around the corner. For EUR it means upside action. Here we do not show monthly and weekly EUR charts, as they stand the same and we saw it million times already, but dollar index really gives fresh view.

    Weekly

    So, let's go further, what we have on weekly... First, is, our bearish grabber on EUR is completed as market shows new lows for few pips. But this is minor event. The major one is completion of our long-lasting setup, soap saga on dollar index with weekly COP. Now, finally it is completed. This COP was major technical reason why we've talked about bearish action on EUR. COP creates Agreement resistance with major 5/8 Fib level. EUR also stands at major 5/8 monthly/weekly support:
    dxy_w_27_05_19.

    Thus, as we can see, this is really valuable context for EUR bullish performance. But - it provides no clarity on the targets, how strong this action could be. Usually, we follow conservative approach and do not dream on far extended points, trying to go step by step, from one realistic target to another. Thus, on coming week we offer you to do the same.

    Daily
    On shorter-term charts we turn back to EUR. On daily chart we could get Double Bottom pattern, as W&R action is very typical for it. In our case it is also accompanied by reversal session. Daily overbought stands around 1.1315 area. It means that on coming week our ceil will be right around Stag's culmination point of 1.1327. This is also tough K-resistance area of 1.1283-1.1317 area. But, still - this is second target.

    First one is a neckline and resistance around 1.1283. As we've shown last week, this is also K-resistance area and this is our first destination point:
    eur_d_27_05_19.

    Intraday

    On Friday we've talked about sharp reversal and its target. In fact, we're not very interested in current upside leg per se, just because we've missed it as reversal was very fast. The one thing that we would like to get is meaningful retracement down. Thus, we do not care much on when this retracement will start. But, on 4H chart we could make a suggestion that this should happen soon, somewhere in 1.1210-1.1240 area.

    In fact, first ultimate target of our butterfly has been hit - this is 1.27 extension. Slightly higher we see resistance cluster of next butterfly target, K-area and COP target. We suggest that this should be sufficient barrier to trigger downside pullback:
    eur_4h_27_05_19.

    On 1H chart, in turn, we watch for this retracement, and it would be nice if we would get, say, "222" Buy pattern from one of the Fib levels. As this is first upside turn after the drop - retracement probably will be 1/2 - 5/8 levels. On this chart, we like K-support of 1.1160-1.1175, which also coincides with WPP and stands near major 1/2 Fib support (not shown).
    eur_1h_27_05_19.

    Conclusion:

    Dollar index shows signs of possible reversal down, which suggests upside continuation on EUR and some relief on GBP. At the same time, target perspective of this reversal stands unclear by far and we're going to follow it from one short-term target to another.



    The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
     
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  2. Deltoid88

    Deltoid88 Sergeant

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    Important update on EUR. In my last update previous week I showed scenario for one more lower low before price can push higher, although that scenario is still possible, I do not consider it likely. I believe we found temporary bottom on EUR, and price will now move higher in 5 waves to complete C wave and upside correction. Reason why I do not think there would be one more lower low short term is because this latest upside action from 1.1106 lows was very impulsive, and does not show any signs of correction, if that is still part of wave 4, like I suggested in my last post last week, then action should be much slower with corrections along the way, since that was not the case I think this upside action is not part of wave 4, that waves 4, 5 and blue wave B are finished and that we are headed to higher levels. Confirmation of this would be breaking 1.1324 level, and that is exactly what I expect to happen, there are a lot of stops above 1.1324 level. My first targets would be at 1.1340-1.1370 zone, I expect corrective wave 2 to start in that zone. Also change from my last post is that I think we printed blue wave B with this new low on 1.1106, not red wave A like I labelled before, however, both scenarios suggest upside move.

    Important update on monthly and weekly charts. I am on board with Sir Sive, now I think we are still in downtrend long term. I expect EUR to break 1.03 lows, and after breaking those lows, massive bullish reversal could start. There could be years before that happens.

    Monthly chart: Until now I thought that bearish action from 1.2554 was correction, now I believe it is impulsive action which means we printed red wave 1 on 1.1212 level, not red wave A I previously thought, after which read wave 2 has started. We printed bullish blue wave A of that red wave 2, just printed bearish, blue wave B on 1.1106, and now bullish, blue wave C of red wave 2 has started. It should have 5 waves structure to upside ending somewhere in 1.1560-1.1830 zone. It is likely to end above blue wave A which finished at 1.1569 level. More precise targets price action will offer in future.

    EURUSDkMonthly.

    Weekly chart: More closer look what is happening longer term, and how blue C wave should look like. Rectangle zone could be great area for taking short position long term.

    EURUSDkWeekly.

    Daily chart: More closer look how C wave could develop. My plan is to take profit from my long positions above 1.1324 level, zone = 1.1340-1.140. Price action will offer more precise targets in future.

    EURUSDmDaily.

    4 H chart: More closer look on price action from previous weeks. Wave 4 had shape of flat, ending at 1.1263 - blue C wave. After that final, red wave 5 has started ending at 1.1106 making that shallow, new bottom I mentioned in my previous updates.

    EURUSDkH4.

    1 H chart. Many waves have finished at 1.1106 low. Any retracement should be seen as buying opportunity against 1.1106 bottom. It is possible that EUR could just continue grinding higher without any significant corrections. I advise if you do not have long positions, to enter market immediately. Keep it simple.

    EURUSDkH1.

    How to trade this?

    First, position - Long entry in zone = 1.1130-1.1230, SL1=1.1105, SL2= 1.10, TP zone = 1.13-1.14. Comment, SL2 on 1.10 level covers scenario if there is one more lower low to come, but I doubt that. Main SL should be 1.1105.

    Second position - sell entry after wave 1 of wave C is finished. It is still unknown where that could be, but my guess is that it would be in 1.1350-1.14 zone. Price action should provide more precise trading plan in future. For now, let's concentrate on long positions.
     
    #2 Deltoid88, May 25, 2019
    Last edited: May 25, 2019
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Yes, it seems that different type of analysis focus on the same area. This fact provides more confidence in our view.

    Indeed, as we see signs on weekly time frame that suggest dollar drop, drop strength postpones until change in fundamental background. As Fathom consulting still suggests rate hike by Fed - this is most near standing factor that could make unexpected impact. But hardly it will happen sooner than 6-12 months.
     
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  4. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Retracement could be over any moment now. There is decent probability that we will not see deeper retracement.

    1H chart:

    EURUSDkH1.

    15 MIN chart:

    EURUSDkM15.

    How to trade this?

    Long entry in zone = 1.1170-1.12, SL1=1.1140, SL2=1.1105, SL3=1.10, TP1 zone = 1.1283-1.14, TP2 zone > 1.15-1.16
     
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  5. Deltoid88

    Deltoid88 Sergeant

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    Update on GBP. I completely agree with Sive's view here. We are in full downtrend on GBP on daily and weekly charts. On hourly charts some upside retracement is expected.

    Weekly chart:

    GBPUSDkWeekly.

    Daily chart: I believe we are currently in wave 4 of wave 3.

    GBPUSDkDaily.

    4H chart: More closer look on that wave 4, and my expectations what will happen.

    GBPUSDkH4.

    15 MIN chart: Full wave count on that wave 4.

    GBPUSDkM15.

    How to trade this?

    I see many scalp trades in this wave 4, with very tight stop losses, but main goal is to open short position when wave 4 is completed. Maybe it is already completed, but I do not consider it as most probable scenario.

    1st position - sell entry in zone = 1.268-1.271, SL1=1.275, SL2=1.29, TP zone = 1.259-1.262
    2nd position - long entry in zone 1.259-1.262, SL=1.254, TP zone = 1.27-1.282
    3rd main position - sell entry in zone 1.27-1.282, SL=1.297, TP zone < 1.24
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    yesterday was relatively quiet session due US holiday. Our setup mostly stands the same and we're watching for proper entry point on long side of the market. This week we're watching for two destination points. First is 1265 - potential neckline of double bottom pattern. Second is breakeven point around 1.1325 top, which is also strong daily resistance. Other targets stand beyond daily overbought and not interesting right now.

    As our weekly plan suggests - we need moderate retracement for position taking and it seems that it stands underway:
    eur_d_28_05_19.

    Right now there are two scenarios of retracement are possible. First is, downside action is started, second - we could get another upside leg and market could form butterfly here, on 4H chart and start dropping after that. Personally I gravitate more to first scenario:
    eur_4h_28_05_19.

    And still keep idea of possible H&S on 1H chart. Here we could get either minor ab=cd or larger one, based on H&S, but both OP target stand in the same level - inside K-support area that we've specified as potentially attractive level for position taking.
    eur_1h_28_05_19.

    Depsite multiple scenarios they do not change the core and are mostly tactical, providing slightly different shape of retracement. Our task is watch for patterns. As soon as we get it - we get confirmation of entry point and confidence to go long.
     
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  7. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Sive's vision what shape correction will have proved correct. There was one more leg down indeed, and it looks completed right now, and EUR should be ready to progress higher. Have on mind that this downside action could be wave 5 with targets under previous lows on 1.1106. but I still think it is just correction and that EUR will go up.

    4H chart: First targets should be between OP and 2 x OP extensions 1.1268-1.1372. If upside action happens this will be wave 3, and for wave 3 usual targets are above XOP on 1.1331.

    EURUSDkH4.

    15 Min chart: Here I want to show why I think downside correction is over. It had shape of ZigZag, with all waves and OP target completed.

    EURUSDmM15.

    How to trade this?

    Long entry in zone 1.1160-1.1180, SL=1.1105, TP zone = 1.1268-1.1372
     
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Morning guys,

    So, all preliminarly steps of upside reversal are done. Now the only concern is - whether reversal wil happen or not :D As political background stands on recent EUR drop - it is more risk right now around any long position.

    On daily, the only new feature is possible bullish grabber, that we should keep an eye on:
    eur_d_29_05_19.

    On 4H chart now we have the pattern. OP stands precisely around our first point - 1.1266.
    eur_4h_29_05_19.

    And now about "bad things". The bad thing is too fast collapse recently. Our H&S Setup is done well and we are right "at target" where we initially intended to go long. But - CD leg... it is too fast. It means that we should be ready that EUR could drop to XOP target. In general - all targets stand relatively close, in 30-40 pips range. Still, it is could happen. And - XOP level 1.1233 is our major indicator. Drop below it means that bullish setup stands under distruction.
    eur_1h_29_05_19.

    That's being said - in new reality when risk are greater, you need to make a decision on participation in this bullish setup. If you want to go long - 1.1233-1.1250 is an area where long position should be taken. Stop should be below XOP area. Currently market stands at the point where it has to either turn up or it will be collapse and drop below recent lows.
     
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  9. Stag

    Stag Sergeant

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    So far so good. The Euro has satisfied my projected downside expectations but I agree with Sive, there is potential for lower.

    The last recovery ended after three waves and prices are below the lower boundary line of the Kennedy channel. That suggests this decline has further to go.

    It will take a push up through 1.1172 to signal a low may be in place. Only a firm brake above 1.1198 would confirm it. Note that 1.1107 should hold as support for any bullish view.

    Good luck.

    EU_190529.
     
  10. Deltoid88

    Deltoid88 Sergeant

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    Update on EUR. Although EUR continues to go lower, levels 1.113-1.114 should be great area to take long position. Odds that this downside action are not just retracement, but impulsive wave 5 with targets below 1.1106 increase, but I still think it is just retracement, but even if it is not, we should get some small bounce, wave 4 of wave 5, and be able to have trade with low risk. Also, if this is indeed wave 5 with targets below 1.1106, that wave 5 should be capped by previous length of wave 3, means that wave 5 will fail to reach 1.10 level. Stops for longs could be placed there, even if it is distant stop level, odds to reach it are very small in my view, which makes overall risk small as well. To sum up, some bullish action is expected, if it is slow and gradual, then it is probably just wave 4 of wave 5 and we are heading lower, under 1.1106, if upside action is strong, then probably this was just retracement and we are headed to upside. My main point is that if EUR even breaks 1.1106 lows, that does not mean bullish action wont happen, it is probably just postponed. 1.10 level is key support, if it breaks, then my view is not valid.

    1H chart: 2 most probable scenarios.

    EURUSDkH1.

    15 MIN chart: More closer look and full wave count.

    EURUSDmM15.

    How to trade this?

    Long entry in zone = 1.1130-1.1140, SL1=1.1105, SL2=1.10, TP1=1.1150-1.1170, TP2=1.1290-1.1370
     
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