EUR/USD – Is the wave 5 unfolding in a diagonal triangle pattern?
The pair has been in a multiyear complex corrective down trend since July ’08. We prefer to view the setback from 1.4945 (May ’11 high) as a wave (Y) of the large corrective pattern which is likely to retest the key swing low at 1.1870 on multi-month basis (a break lower would be also possible). The rally from 1.2040 (July ’12 low) could test the 61.8% Fibonacci resistance at 1.3840 before reversing. A reversal below 1.2875/1.2660 would renew the bear trend. A break above 1.4250 (Key EW swing high/2008 downtrend line) would open up large triangle pattern which targets 1.4500/1.4945 area.
The wave 5 started from 1.2660 and appears to be taking longer time to complete and it may unfold in a diagonal triangle pattern. We see that the pair is now in a wave [iii] with upside focus on 1.3485. A break above would test the 1.3600/1.3650 resistance before turning lower for a wave [iv] pullback. The 1.3400/1.3370 support looks to hold in the immediate term. A reversal below 1.3250 however would signal the completion of the wave [iii] and would refocus on 1.3130/1.2995.