EUR/USD expected to go lower

Euro Dollar against US Dollar (EUR/USD)

Last week I suggested in this column that there were two outstanding possible scenarios that may help us interpret current price action on the charts, and how that helps us to forecast major directional change over the next few days and weeks.

Scenario #1 in brief – that the down move will continue, but that downward and sideways action over the next several days was probable.

Scenario #2 – The correction is complete and the market will continue to rally to test the July 8th high.

I continue to favor Scenario #1, and that is primarily because of the price pattern on the chart rather than any particular technical or fundamental indicator. The market has indeed moved down and sideways during the past several days. Neither the low of Oct. 28th nor the high of November 2nd has been surpassed.

There is even the possibility that a triangle pattern is forming in this consolidation which, if it occurs would imply several more days of tight range movement.

Whatever pattern eventually emerges from the consolidation, it is most likely a wave four in Elliott Wave terms, and the outcome of a wave four pattern, in this case, should be an eventual break of the low at 1.2326 with a near-term price target between 1.2000 – 1.1700.

A rise in price above 1.3881 before 1.2326 is exceeded to the downside would cause a change to this outlook.


EUR/USD chart as at 6 November 2008 using NextVIEW Advisor

TECHNICALS

R1 – Nearby resistance at 1.3298.
R1- 1.3881
S1 – Nearby support at 1.2317
S2 – downside targets from 1.2000-1.1700

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.