“Wave (B) could take the form of a triangle or an expanding flat. It is too early to say what it will be right now, but once it is finished, we will expect wave (C) of Y to the downside.” It’s been less than a week since we said that in “EURAUD Getting Ready For 1.32” on January 28th. Now the market seems to be answering what wave (B) will be and it looks like an expanding flat correction. The 4-hour chart of EURAUD below provides the evidence.
It shows a nicely looking five-wave impulse to the downside. According to the Elliott Wave Principle, every impulse is followed by a three-wave correction in the opposite direction. Here, the correction appears to be a textbook example of an A-B-C expanding flat with a 3-3-5 wave structure. Furthermore, so far, wave (B) has retraced exactly 61.8% of the previous wave (A). This Fibonacci level often serves as a termination point for second waves. In conclusion, EURAUD has probably finished a 5-3 Elliott Wave cycle. If this count is correct, we should now expect wave (C) to the south. Considering the bigger picture, it could lead the exchange rate as low as 1.32.
