Pure Guesswork

Looking for patterns in the rally in EURUSD. . .

It began, it seems, with a 3 wave pattern, which could be seen as corrective.

Shown in more detail on a 2 hour chart from Friday, March 13.

• (A) Beginning with the low at 1.2454 at the Asian open on Tuesday, March 3, the first A wave was itself a 3 wave pattern which completed during the New York morning on Friday, March 6.


• (B) Another 3 wave pattern (down) ended a counter move during the New York morning the following Monday, March 9.


• (C)The next C wave up began to show more of an impulsive character than the first A wave. It began in earnest in the Asian and European sessions on Tuesday, March 10. And in fact it preceded and was a precursor of the US equity rally which began that day. The first interior wave of the C wave, or (a) of C, actually ended right before the US equity opening, and there was a sharp downward (b) of C which gave up most of the overnight gains. The following (c) of C was extended in time and also exhibted a mildly impulsive character. The (c) of C wave ending on Friday, March 13, was not followed by any significant downmove. Indeed, it could be said that during this C wave sentiment shifted, as the idea that this EURUSD rally might be more than simply a corrective move in an ongoing downturn began to be more and more entertained.

The C wave reached a level approximately 1.618 times above the A wave.
It also had an alpha-beta base, followed by a 3 step move to approximately the 2.618 extended delta target.

With the change in sentiment which had begun during its later stages, the 3 wave pattern noted above was followed by 2 impulsive patterns as the rally took on life.

The first began on Monday, March 16, when in the New York morning the 1.30 level was broken. This was the alpha wave. Over the next 24 hours the market drifted down in a gentle 3 wave pattern, reaching a low on Tuesday morning. This was the beta wave. From this base came the explosive pattern played out the next day with the Fed announcement. The pattern topped out that evening at the 4.236 delta extension level.

After a slight pullback, another smaller impulsive pattern played out, this time reaching the 6.854 (phi to the 4th power) Fibonacci extension. This pattern can best be seen on a 15 minute chart.

The 2 impulsive patterns put together creat a classic 5 wave Elliott pattern.

A 0.486 retracement (or approximately 50%) of this 5 wave pattern would take us to 1.3298. Or roughly 1.33. It is interesting to compare this level to the chart of the first larger impulsive pattern. In the strong move up on the Wednesday afternoon of the Fed annoucement the market drove right through the 2.618 delta extension target, completing itself at the 4.236 level. Often when this happens I have found that subsequent corrective moves gravitate to that level which was, in a sense, ignored on the way up. This 2.618 level would be more or less the same as a 50% correction of the entire 5 wave pattern (0.486). Thus it would not be surprising if we saw a corrective move in the EURUSD to the 1.33 level, or a little below.