Yesterday we looked at the monthly chart of EUR/USD and showed the case of a long-term uptrend and that more upside pressure should be expected. Today we will look at the lower time-frame (daily) to see if that supports yesterdays conclusion.
From the daily chart we can see several supporting factors to yesterdays call for a continuation higher in EUR/USD. If we start with the possible wave-count we can count a five wave rally from the March 2020 low at 1.0636 to the January 2021 peak at 1.2359 as wave 1. We can count a nice flat A-B-C correction in wave 2 correcting 38.2% of wave 1 and we are now in the very early beginnings of wave 3 towards at least 1.3993 and possibly even higher.
Looking at the indicators, they also supports a possible long-term bottom in wave 2 now is in place as we see both a long-term hidden divergence and bullish-divergence in both the 14 day RSI and the long-term Stoch. All pointing towards a strong impulsive rally in wave 3.
Under the Elliott Wave Principle wave 3 is often the strongest of the impulsive waves and often becomes extended and a 1.618% extension of wave 1 would call for a rally to near 1.4400 in the months ahead.
We have seen the first minor resistance at 1.1801 being pierced indicating wave 2 has completed. Now we will be looking for a break above resistance at 1.1909 confirming that wave 2 has completed and wave 3 higher is in motion. A break above resistance at 1.1909 will also leave us with a failed S/H/S top and failed patterns normally indicates strong rallies in the opposite direction of the failed pattern, which in this case is to the upside.
