Monday, August 25, 2014
EUR/USD - Time for a correction in red wave 2
With a perfect touch down on the 61.8% target at 1.3182, we have most likely seen the bottom of red wave 1 and should be looking for a correction in red wave 2 towards at least 1.3380 (the 38.2% corrective target of the decline from 1.3701 to 1.3182). A correction to 1.3380 will also take us well back into wave iv of one lessor degree and close to the apex of the wave iv triangle, which is a very common corrective target. That said, we have to be aware that the expected correction easily can carry us higher towards the 50% corrective target at 1.3442, which also marks the top of wave iv of one lessor degree.
Short term a break above 1.3210 will be the first small warning that the bottom is in place, while a break above 1.3261 confirms the bottom for the correction to at least 1.3380.
I just want to add one important note. We are in wave (iii) lower and corrections during third waves tend to be small and even sub-normal.