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EUR GBP Could Turn Bullish Soon

The EUR GBP exchange rate went below 0.77 today, which is its lowest level since March 2008. To many this may be a reason to get more and more bearish on the pair with each pip to the downside. However, the Elliott Wave Principle signals a “proceed with caution” sign, because it could be time at least for a temporary recovery soon. The chart below shows one of the clearest impulses in terms of wave structure and Fibonacci ratios. See for yourself.
eur gbp 15.1.15
As visible, the whole decline that started from 0.8770 could easily be counted as a five-wave sequence, where wave (5) is still in progress. The structure of waves (1) and (3) is also very clear. Wave (3) is extended to exactly 161.8% the length of wave (1). Wave (4) retraces 38.2% of wave (3). There are two reasons we believe the bears may be running out of power. First, according to the theory, every impulse is followed be a correction in the opposite direction. So regardless of how the bigger picture would look like if we examine it, this five-wave decline here suggests we should expect a reversal, once wave (5) is over. And second, wave (4) is a triangle. No matter where you see this pattern, it precedes the final move of the larger sequence. In this case, the wave (4) triangle precedes wave (5). Now, wave (5) does not seem finished yet. It could take the form of a regular impulse or an ending diagonal. In both scenarios, EUR GBP could visit the territory of 0.75, but not much lower.



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