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11.10.2016 13:36

JP Morgan Watching Breakout Signals on EUR/USD

"EUR/USD failure to stabilize above a projected E-wave target at 1.1347 (int. 61.8 %) seven weeks ago leaves EUR/USD at great risk of having completed a 1 ½ year old consolidation triangle with very negative implications.

Only a break above 1.1367 (August high) and ultimately above 1.1426/50 (pivot/int. 76.4 %) would constitute a game change in favor of a re-test of former highs at 1.1617 and at 1.1712 with the option to extend to the classical wave IV target on big scale at 1.1811 (int. 38.2 % on highest scale).

So considering the classical overshooting at 76.4 % retracements it would most likely take a break above the 1.1500 handle to eliminate the imminent sell-off risk. It would take breaks above 1.1876 and 1.2042 (2010 & 2012 lows) though to call for a long-term trend reversal.

In the short.-run we are now watching the daily triangle between 1.1313 and 1.1056 closely as a breakout would provide an early indication whether we are dealing with a stronger recovery or with the potential resumption of the downtrend.

A decisive hourly close above 1.1347 (i.e. above 1.1370) would thereafter bring 1.1426/50 (pivot/int. 76.4 %) and possibly former highs at 1.1617 and 1.1712 back into focus whereas breaks below 1.1056/49 (daily triangle/minor 76.4 %) would challenge the essential countertrend decline target zone between 1.0782 and 1.0710 (int. 76.4 % on higher scale/pivot).

It would take a break below the latter though to confirm the resumption of the long-term downtrend in favor of an extension to 1.0072 (76.4 % of the 2000-2008 rally) and to wave 3 projections between 0.9652 and 0.9298".

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