I had been shorting EUR/USD from 1.51, and closed out the trade when the EUR hit 1.2700. However, I acknowledged in that post that there was the potential for more downside. We did in fact continue selling off hard, to below 1.20! Commensurate with this selloff has been the creation of a massive bear herd—now it’s obvious that the euro WILL collapse! I think the EUR/USD will bottom soon and test 1.3250.
Take a look at the chart above. From an Elliot Wave standpoint, we are nearing the end of an extended decline. Wave-V from 1.52 is nearly complete, and was approximately as long as the distance from the beginning of Wave-I to the end of Wave-III; this is a common occurrence when Wave-V extends. Wave-iv of Wave-V formed as a triangle, and triangles often indicate a move is nearly exhausted. If we do bottom, a rally to 1.2750 followed by a rally to 1.3250 seems reasonable.
The chart above shows the USD Index. I show this chart simply to highlight the triangle that USD broke out of. This sort of thrust is usually terminal.
The next few weeks should be very interesting!
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