It has been a wild Wednesday for EUR USD, climbing up more than 260 pips. However, this bullish strength may turn out to be deceptive.
On October 7th we showed you a forecast, called “EUR USD rate aiming at 1.28?”, suggesting that EURUSD is likely to extend its rally, because we thought it was in the corrective wave IV. When this article was published, the exchange rate of the Euro against the US dollar was 1.2640. Yesterday it not only touched 1.28, but reached 1.2885.
It turns out that we were not bullish enough. However, this does not change our bigger picture outlook, which means that wave V to the downside is still to be expected from now on. Furthermore, the wave structure of the rally from 1.25 to 1.2885 is clearly not impulsive, which means that it has to be corrective. It looks like an A-B-C zig-zag with a triangle in the position of wave B. According to the Elliott Wave Principle, triangles precede the last wave of the larger sequence. In this case it is wave C. If this is the correct count, we should prepare for another decline in EUR USD, which should lead the rates below the bottom of wave III at 1.2500, unless there is a truncation.
