EURAUD has been steadily declining since February 11th, when the pair climbed as high as 1.6250, before eventually reversing to the south. Currently near 1.5250, there seems to be no shortage of signs that another significant reversal might occur soon. Let’s examine the hourly chart of the exchange rate, in order to visualize the Elliott Wave Principle‘s verdict.
As the chart shows, the decline from 1.6250 to 1.5105 so far, could easily be counted as a five-wave impulse. Pay attention to wave (2), which has the wave structure of a running flat correction. Obeying the rule of alternation, wave (4) looks more like a double zig-zag. According to the Wave Principle, every impulse is followed by a three-wave correction in the opposite direction. In addition, wave (5) reminds us of an ending diagonal, which is a reversal pattern by itself. Furthermore, the relative strength index is showing a strong bullish divergence between waves (3) and (5). If this analysis is correct, we should prepare for a three-wave recovery in EURAUD, which could take the pair to 1.54 or even higher. However, picking bottoms is never a good idea. It is always wiser to wait for the confirmation. In this case, we will have it, if EURAUD takes out the top of wave 4 of (5) at 1.5230. Until then, the trend remains to the south.
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