We took the EUR/USD 55 stop this morning on a pre-New York stop reach. However, the markets are thin and choppy so far in New York with no economic data of any significance scheduled for release. After knocking the 50-55 stops out of the market, EUR/USD reverted back into the Sunday night 1.3525-50 range as we currently trade 1.3545.

I am watching two possible EUR/USD scenarios. The first is that Friday morning's move up from the 1.3465 area low to last night's 1.3555 area high was the 1st wave of a 5-wave move targeting the 1.3700 handle. If this analysis is correct, we can expect a 3-wave reaction back towards 1.3500, before the uptrend re-emerges.

Or, scenario #2 labels last night's move to 1.3555 as the end of wave-b, which lays the groundwork for a 5-wave affair through Friday's lows in wave c. 1.3500 should the approximate low of the minor wave 3 within this wave c.

So, in either scenario, 1.3500 should be tested. I am short EUR/USD at 1.3540 with stops above last night's highs for the move to 1.3500. If I book profits there, we will need to watch closely to see which scenario unfolds before preceding.



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

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