Bears are awake
EURUSD started to decline quite sharply, as expected in last weeks analysis – EURUSD weekly outlook – 22nd – 26th August 2016. However it is too early to conclude that price will reach the bottom structure levels with a single impulsive wave. At best the wave will be less choppy without anymore deeper corrections.
But before all that, the market has to re-enter the bearish channel. Or has the market defined a different channel effectively including the last lower-high?
Of course, the price was not moving perfectly within the parallel channels. It is now quite obvious that the channel is in a different trajectory and angle from the previous bearish channel (wave-B of the triangle.)
Updated wave labelling and the channel
Note: Depths, duration and levels of pullbacks drawn in blue are for illustration purposes only.
The previous ABC ZigZag labelling was questionable, because there is less probability for the wave-C to complete a clean 5-wave impulsive structure within the current channel. Technically a ZigZag without an impulsive 3rd wave that adheres to motive-wave rules, is typically a WXY (double-three) pattern.
So the expectation is still bearish but as a wave-Y (3-wave ZigZag) instead of a wave-C (5-wave motive.) But either is possible and the end result will be the same. But for now WXY seems a more appropriate forecast.
Nevertheless, next hurdle for price is the red trendline.
Next week will most probably bring price down to the red trendline – a crucial point of decision for the overall pattern. Whether or not the price violates the red trendline, could literally decide the overall corrective structure in the Supercycle degree, between a Triangle and a ZigZag. Obviously the forecast and the preferred count is for an overall triangle structure (blue.)
But either way, price is very likely to decline to around 1.10000 levels in the next few days. Since the expected target level is a round-figure and a psychological level; the market might create a lower-degree correction before eventually breaking to the down side.
The expectation for next week is only the smaller red arrow – parhaps the beginning of a large bearish wave.