Technical Analysis on EURUSD

January 6, 2012
EURUSD has placed a low of USD 0.8225 in October 2000 and has seen a 1-year consolidation
holding above this low with the upside cap near 0.96 before entering into a long-term bull trend that
lasted for about six years. The index has witnessed major corrections during May-Sep03, Feb-Apr04
and Dec04-Nov05 with a loss of 10%, 9% and 15% respectively.
Despite of these three major corrections, the pair has maintained its overall bull trend ultimately
reaching a high of 1.6038 in mid-Jul08 gaining nearly 95% (from Oct00 lows). The sharp sell-off
(post Jul08) during sub-prime crisis has witnessed a staggering loss of nearly 23% in just about three
months which pushes the market into the long-term bearish trend.

OSCILLATORS
Notation
BB1: Bollinger Bands (21, 2.00)
BB2: Bollinger Bands (34, 2.25)
BB3: Bollinger Bands (55, 2.50)
L1, L2, L3 for lower, M1, M2, M3 for middle and U1, U2, U3 for upper bands of BB1, BB2 and BB3
respectively.
Stoch1: Stochastic (13,8,8)
Stoch1: Stochastic (21,13,13)
Stoch1: Stochastic (34,21,21)

The below chart shows a daily chart with a set of Bollinger Bands BB1, BB2 and BB3 along with the
Stochastic oscillators- Stoch1, stoch2 and stoch3 in the lower panels in that order. U3 is all set to
curling downwards suggests some kind of bottom is likely to place in the near-term, %K is above %D
in Stoch1 but below %D in Stoch2 & 3 though getting closer to it gradually. Hence, any weakness
from here is limited and is all setting for upside move.

In the weekly chart, the L1 is below L2 and these both are getting closer to L3 which is position at a
level of 1.27. U2 & U3 are flat with U2 setting to curl down. This suggests the index may see a dip
below 1.27 and could form a bottom around this level within 4-6 weeks (see red circles with gray
dotted vertical lines that spot the similar situation in both BBs and stochastic). The %K is below the
%D in all stoch1, 2 and 3, the extrapolation of stoch1 and stoch2 suggests for a limited weakness
towards aforementioned levels and a rally could be seen thereafter.

NEOWAVE
Short-term-1:
Wave analysis based on the Neowave theory on the daily chart is shown below.

1. The (b)-wave has retraced more than 61.8% of (a)-wave but has consumed less time and hence
the overall [e]-wave should be unfolding as Neutral Triangle or Reverse Alternation Contracting
Triangle (CT2) or Standard Expanding.
2. As (c)-wave so far exceeded the extreme price-length of (a)-wave (though slightly), Neutral
triangle or Expanding are the best choices ruling out CT2.
3. (c)-wave is unfolding into a corrective structure with similarity in time and complexity but not
prices and hence labeled as Diametric.
4. As the (c)-wave is longest, more time consuming and most subdivided comparing with so far
legs, well proceed further assuming the Neutral triangle.
Price
1. In Neutral Triangles, (c)-wave should at least exceed (a)-wave in price-extreme (In fact, it is the
necessary requirement) and can be as large as 161.8% of (a)-wave, which measure to sub-1.20
levels.
2. It is observed that most of the time (c)-wave of Neutral Triangles achieves an extreme price
length of 101%-110% (a)-wave; this gives a range of 1.285-1.270. But should conclude with a
price-length of above 101% of (a)-wave- below 1.29.
3. Classically, [g] and [a] are equal in prices in Diametric formation, which gives the target near 1.25.
But it is observed that it can attain 61.8% of [a] in price, which is pegged near 1.27
Basis on the above discussion, the more appropriate price target for the [g] will be near 1.285-1.27
levels.

Time
1. If the current labeling is correct, the [g]-wave most likely should conclude not earlier than 16Jan12 or later than 30-Jan12.
2. Alternatively, if current leg is unfolding as an [e]-wave of diametric, it should conclude before 16Jan12 with two more legs yet to form ([f] and [g]). In this case, (c)-wave could extend in time into
the first week of Mar12.
The most appropriate time zone to conclude the [g] [or (c)-minor)] is between 16-30th Jan12 near
1.285-1.27. The rate rise of more than [b]-wave (i.e. a rise of more than 338 points within 8-days.)
conclude its termination.
Short-term-2:
This is an alternative labeling that [e]-begins at May11 highs and the labeling from Oct11 highs
remains same as in short-term-1 view. The only exception is that (y)-wave time could take into first
week of Mar12.

Medium-term-1:
Price action from the Jul08 highs is unfolding into a triangle. Below spread sheet is a working on the
comparison of price-time relationships of various legs of the assumed triangular activity. Left side
columns are working on price termination points and the right one for extreme price levels on the
logarithmic scale (for prices/index-values only). Please refer the below spread sheet for the following
discussion (ingnore the gray colors cells).
1. Price-wise: extreme price of [c] is within 100-101% of [a] but about 106% from termination points.
Possible in Expanding, Neutral Triangles only (ruling out any Contracting type).
2. Price-wise: [d] > [b]:- possible in Standard Neutral Triangle or Standard Expanding Triangle
(ruling out the reverse alternation types).

3. Price-wise: [d] < [c] and [b] < [a]: simultaneous occurrence of these two criteria does not meet
any variety of Expanding Triangle and hence dropping out this possibility.
The only choice we are left with is Standard Neutral Triangle .

Currently, the index is in its last leg (i.e. [e]-wave) of the ongoing Neutral Triangle.
1. The maximum length of [e]-wave should not be larger than [d]-wave in price i.e. current move
should not fall below 1.22 for the termination points.
2. The most likely price of [e]-wave is 61.8%-72% of [c]-wave, which gives a range of 1.268-1.241
3. However, an alternative to triangular formation in larger degree (D)-wave do exist with diametric
(though less probable now). In this case, 1.25 acts as key level to decide the current design. The
odds in favor of diametric increases once the pair starts moving below 1.25 levels.
Hence a part of [e]-wave should touch the region 1.285-1.27 but concludes (well) above this level.
The overall time relationships suggest that [e]-wave should conclude not earlier than Feb12.
Long-term-1:
Price action from the Apr02 lows is unfolding into a triangle based on the following observations.
1. (B) has covered lesser price and time (less than 50%) than (A)
2. Price-wise: (C) is nearly 64% and about 58% of (A) from the price extremes and terminal points
respectively. That is to say, (C) is nearly 61.8% of (A).
3. (A)-wave is longer and most violent segment of the all the four legs [including the current leg-(D)].
These conditions suggests the the Euro is unfolding into a 1st extension terminal or contracting
triangle with reverse alternation.

4. The current leg has breached the termination point of (B)-wave during Jun10 ruling out the
possibility of 1st extension terminal (shown in dotted horizontal line on the monthly chart above).
Leaving the only choice of Reverse Alternation Contracting Triangle.
5. As (B)-wave has taken much lesser time than (A)-wave, (D)-wave should consume more time
and cover more price to create proper alternation between (B) & (D).

This is evident from the price action since Jul08 elapsing 178 weeks so far, which is about 266% of
time taken by (B)-wave and about 125% of the time taken by (A)-wave. The existence of price and
complexity alternation between (B) & (D) further solidifies the choice of Reverse Alternation
Contracting Triangle.
Currently (D)-wave is unfolding as Neutral Triangle and is in a verge of completion. Subsequently,
(E)-wave should drift higher as the last leg of decade long pattern.
1. (E)-wave should be minimum of 38.2% and most likely 50% of (C)-wave in price.
2. If the termination of (D)-wave happens to be near 1.26 (worst case), the minimum and most likely
targets for (E)-wave will be near 1.39 and 1.43 levels.
3. If (D) terminates near 1.30, the respective targets for (E)-wave will be near 1.43 and 1.48 levels.
Note that the above target are minimum and mostly likely only but (E)-wave could even extend above
these levels depending on the termination point of (D) and the structure of (E)-wave itself.
As the time projection for (E)-wave is difficult at the moment, atleast one year from now seems to be
more appropriate, where a decade long pattern is going to complete..
The index is likely to place a bottom near 1.285-1.27 in 2-3 weeks, consolidate for few weeks holding
above this zone before eventually enters into an year-long uptrend towards 1.50 and above.
Post pattern [after the completion of decade long-structure somewhere in 2013] behaviour should be
relatively violent that covers the price-length of the largest leg of the pattern [(A)-wave] or 75% of it.
Hence, sub-1.00 levels possible, as long as index stays below 1.56.

ELLIOTT WAVE
The following analysis is based on the orthodox Elliott wave theory.
Short-term-1

1. Price-length of (w)-wave projected from (x)-wave is measure near 1.26. The index has already
achieved almost 81% of (w), when measured from the end of (x)-wave.
2. The 61.8% of (w)-wave time and the 78.6% of [a]-wave time located in the region of mid-last
week of Jan12.
3. The 100% time window of (w)-wave and [a]-are matching near the end of Mar12.
The (y)-wave could finish at the level near 1.275 by mid-Jan or non-standard correction could unfold
which may finish the (y)-wave near the lower end the gray dotted channel located at 1.265 by end of
Mar12, where bigger (Intermediate degree) [b] conclude. The thought process is shown in orange
and green lines both are equally probable.
Medium-term-1

After finishing the [b]-wave early this quarter near 1.275-1.260, the [c]-wave rally should start as final
leg of Primary (B)-wave that may take the index towards 1.50 and above. This upleg may last for oneyear or so.
Long-term-1
The long-term count suggests Euro is in a secular bear market since Jul08, Cycle-[1] has placed
near the same and currently corrective Cycle-[2] is unfolding. This bigger wave is unfolding into Flat
(A)-(B)-(C) correction, of which the market is in its middle leg (B). The above labelling is based on the
assumption of Normal Flat suggesting a initial rally towards 1.50 and above for one year or so and
subsequently, a multi-year decline starts that could take the index to sub 1.2 levels.

Long-term-2
An Alternative Count

CONCLUSION
EURUSD appears to place a significant bottom near 1.285/1.270 in the coming couple of weeks, before
entering into multi-month rally. This rally could even extend into the mid of 2013 towards 1.50 or higher
with major corrections in between that holds 1.26 levels.
From long-term perspective, EURUSD seems to be waiting for a collapse over the course of next 4-6
years diving to sub-1.00 levels. The initial rally may be a little calm before the deadly stom.