Today's Support and Resistance Levels:
S1: 106.42 R1: 106.73
S2: 106.26 R2: 106.88
S3: 105.71 R3: 106.94
Technical Overview:
Since the rate had reached its low at 94.10 we saw wave 1 of a new large impulsive rally moving higher to 104.59. Wave 2, which corrected wave 1, met support at the 38.2% Fibonacci retracement target at 100.58 (the low for wave 2 was 100.32), and as it can be seen on the chart above, wave 3 is now well under way. Looking at the structure of wave 3 until now we can see that the rise has been very violent and strong, which is exactly the structure we are looking for in wave 3. We can also see that we have already broken above the new Base Channel resistance line, which is the first clue, that wave 3 very well could be an extended wave, which would call for a rally to 117.25. However, on the way higher strong resistance will be found in the area from 110.76 to 111.43.
We should also remember that corrections of wave 3 tend to be subnormal. Therefore, we will have to be careful in picking our entry levels, but also our stops. In the short term we should see a minor rise to the 106.80 - 106.88 area followed by a new decline to 106.26 before the next powerful rise higher towards 108.50 and likely even 109.92.
Trading Recommendation:
We want to be long EUR, but the ideal entry point will be hard to find as wave 3 is already well ahead, but we will buy EUR at 106.35 or a break above 107.13 (one order cancels the other) with a stop at 105.70.
