EURUSD ANALYSIS

We have already went through half of the year and as much as we hate to admit it, EUR is killing very proficiently any bullish signs it occasionally shows. It can always surprise us of course and decide to stun a 1000-2000 pip rally, that we have been so eagerly anticipating, however, this seems increasingly unlikely, at least without the help of the FED and QE3. Technically speaking we have a really intense downtrend that despite its extreme sentiment just cannot be shaken. Fundamentally speaking, we believe a weaker Euro is ultimately good for the EZ and that to a certain extent this is what the governments of Germany and France are aiming to achieve (as well as ECB). I firmly disbelief, as well as the rest of my firm, that the EUR will go to parity with the USD, or even drop under 1.14's. However, there are still some 2000 pips lower before we reach those key levels. At this point, we will put a target on the Euro of 1.2044, which can easily come in a couple of months from now or by the end of the year. We shall not make any statements as to when it will come. As we know, markets are a tricky thing, and as a trader you have to trade what you see not what you think. Any signs of bullish trends shall be respected, just as we respected the uptrend from 1.228's to 1.275's.

Below we have updated our Long-Term charts and we will provide brief explanation as to what is what and what our views are. We have also included some short-term charts in order to respect our main company belief that a trader should be always without bias and trade what he sees.

This weekly chart represent our view that EURUSD is in an immense weekly H&S formation with targets of 1.15's. While this H&S doesn't seem to considered valid my many, we, through our own statistical analysis has found that such patterns are indeed worthy to be considered H&S, despite their complex nature. Nevertheless, even if you disagree with our H&S view, there is still a very decent and well respected descending channel. Indeed, price broke twice above it and once on a weekly close above it, but price action quickly corrected this and the results are in front of you. Elliot waves also do seem to point to a 5 wave rally unfolding from the recent top @ 1.348's. We have either completed a 3 wave down and are underway of the 5th wave or we are about to complete an extended 3rd wave in a 5 wave fashion. Scroll under for a clearer EW view on the EUR on a 4h chart.

When this H&S was first spotted by us, we said that shorts should be favored. However, the pattern did turn out to be a complex H&S and shaped itself to what u see now. However, when we saw that price rejected @ 1.338 (also the bearish flag resistance zone as u can see above aka perfect technical play on a bear flag) we said that if one wanted to hedge EUR exposure or build a long term short, 1.338 was the best level to do so with a stop of 1.342, seems we were right. Unfortunately we took our our hedging shorts @ 1.3's, because longs were very much holding, and we decided to re-enter to the short side under 1.295 as we did - all the way down to 1.228.

This is my guess as terms as EW on the EURUSD. Keeping in mind this is extremely simplistic, and its more for a guidance purpose than anything else. I and none of my team are professional ellioticians, so I do not claim these wave counts are perfect, however I do think they are pretty accurate. Despite shorts breaking on the EURUSD, we shall assume that it was a simple failure on news spike, and shorts still hold their valid targets of 1.22391.

This is the short term view on the EUR. One can easily see that EURUSD is holding for the past 3 days HWB shorts on the EUR drawn from 1.258. Below is another chart with a bit more explanation.

Do not be surprised to see today's low hold, and go into another HWB short from 1.258. The real point of concern for bears would be if the next short drawn from 1.258 to whatever the low is, doesn't hold. This might potentially lead to a rip-your-face-off rally. At this point however, I believe its safe to say shorts drawn from 1.258 to lows are the most valid ones and short side is completed favored while that short holds. If we do reach new lows today @ 1.238 EURUSD is likely to pull into an even more aggressive extensions. Prepared by George Stoykov.

Disclaimer: This report does not give recommendations or investment advice and shouldn't be threated as it does. Trade on our own risk. This is simply mine and my firms analysis on the EURUSD. We hold no liability for any losses you might take.