- There is a potential long opportunity using Elliott wave theory.
- Dollar continues to fall, giving strength to other currencies.
- Bulls remain in control for the time being.
In the previous analysis, we did on July 14th, the Euro was rallying up toward a resistance level of $1.12. I want to take a look at price action now as it looks like there is a potential buying opportunity in the Euro.
Applying the basics of Elliott wave theory to the price action on the daily chart, we can see that there have been two small impulse waves and two retracements. According to Elliott wave theory, there are normally 3 impulse waves in a trend. The pullback also looks very stable with candlesticks of similar size.
There is an opportunity to go long with a very attractive risk-reward ratio. Taking a long around current levels, setting a stop below the most recent local low with two targets set at 1.12 and 1.14 gives a very attractive trade. The only risk here is that the retracement has not been fully completed yet, but the expectancy of the trade is high enough. Of course, there is no certainty of any trade working out, which is why it’s so important to understand risk management.
See the chart below for the trade. We will re cap it next week.