We have been working under the assumption that the EUR/USD top at 1.2972 was in fact the high and the market is simply retracing back to those highs before the ultimate correction lower towards 1.2600. Armed with the analysis, we have been trading in the direction of the longer-term uptrend, which has served us well. But I have redone the Elliott Wave count and now have to entertain the idea that 1.3000 might not hold, and if not, the next target is approximately 1.3300.

The Elliott Wave and Fibonacci Analysis that produces the 1.3300 target is illustrated below. It's rather involved, so I'll just describe it as the targets for the top of Wave III and Wave V are based on .618 Multiples of Wave I. In addition, there is the strength of the 50+ ADX reading after the completion of Wave III. This indicates the strength will likely continue for one more doomed push above the highs. The doomed push above the highs could find the Fib and Wave resistance at 1.3300.

The good news is that we don't have to know where the market will stop to make money. All we have to know to put winning trades together is the direction of the market from the last few days, and if the direction is likely continue for at least one more day.

We look to be in the 5th and final up wave that is either going to complete just above 1.3000, or above 1.3250. Look back at the daily chart to orientate yourself on this 60-minute chart. The big wave count that I am referring to is the blue Roman Numerals with a gray background. We have completed a wave IV down and look to have just began the 5th and final up wave. Within the 5th wave, we have just completed the Wave I (shown in green) of 5 waves within the larger 5th wave up. So in other words we have completed Wave I of V.

Again, we can confirm that the Wave (I) in green is complete, and we have moved lower in Wave (II). Our job now is to find the bottom of Wave (II) to get long for the 3rd Wave up. According to Elliott Wave theory, the third wave is usually the most powerful, and profitable, wave to trade.

The bottom of Wave (II) looks to be forming a Butterfly Fib pattern at around 1.2780. We will be bidding here with stops under 1.2730 for a initial target of 1.2880. If 1.2880 deals, we will likely take one-third of the position off and trail the stop to breakeven.

This trade is meant to be more of a swing trade in nature, so we must allow our analysis to work for us.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.