EURUSD – The wave 4 correction may be forming a bearish triangle
The pair has been trapped in a multiyear triangle consolidation between 1.4950 and 1.1870. We prefer to view the setback from 1.4945 (May’11 high) as wave (D) of the large triangle which is likely to retest the key swing low at 1.1870 on multi-month basis (even a push lower is possible). The 1.2695/1.2750 resistance is critical level for the bearish view ahead of 1.3000. A reversal above however would refocus on 1.3485.
The corrective bounce from 1.2040 could be a wave 4 which may be unfolding in a bearish triangle pattern. Staying below the swing high at 1.2440 would favour bear trend renewal. A reversal below 1.2200/1.2135 would refocus on 1.2040 initially ahead of the 1.1900/1.1870 support. The 1.2500 (triangle trendline resistance)/1.2550 (38.2% retracement level) resistance may prove tough in the near term. Nevertheless, a break above 1.2550 would expose the tough 1.2690/1.2750.
