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In The review of the bigger Time-Frames (Annual Wave Analysis, 2008) three most probable scenarios of the supposed price movement of major currency pairs were considered. For the first three months the wave picture has changed that allows to correct the current variants of wave counting and to change preferences among the accepted variants.
I. European mirror twins EUR/USD and USD/CHF
If we assume the first active wave of a correction as 100%, and the following main wave of a correction will be longer than the first one (> 100%), then the second wave may be called external retracement according to the terminology of Robert C. Miner. Such a term is quite justified in wave analysis when we speak about some variants of corrections — for example about expanded flats and running triangles.
Such variant of correction for wave-link [B] of V of a large zigzag was supposed in scenario v.1 for the euro and Swiss franc (refer to The review of the bigger Time-Frames (Annual Wave Analysis, 2008)). But at the moment the price has exceeded considerably the expected maximum level of external retracement (162%) and has reached limit values (~190%..210%, refer to Figures 1 and 2).
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Figure 1. External retracement of EUR/USD is more than 200%.
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Figure 1. External retracement of USD/CHF is about 200%.
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In this situation scenario v.1 is relegated to the background though it isn’t cancelled yet. Variant v.3 becomes the most probable (refer to Figure 3).
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Figure 3. Wave counting on the USD/CHF monthly chart. Variant 3.
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In the framework of scenario v.3 the ending leg [C] of V of the last zigzag of global diagonal triangle is forming. The are of projective values for the completion of diagonal triangle USD/CHF lies below the forming line of contracting diagonal triangle and below the 0.85 mark.
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Figure 4. Wave counting on the USD/CHF weekly chart. Variant 3.
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One of the possible variants of counting of the ending impulse [C] of V of the Swiss franc supposes that at the present wave (3) of [C] is forming. Fibonacci levels for its possible completion are marked on the chart.
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Figure 5. Wave counting on the EUR/USD weekly chart. Variant 3.
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The euro’s chart is almost a mirror reflection. Wave (3) of [C] is forming here as well. Fibonacci levels for its possible completion are marked on the chart. The area of projective values for the completion of impulse [C] of V should be define more exactly after wave (4) of [C] is completed.
Thus at the moment scenario v.3 considered previously seemed to be the most probable. It supposes further decline of the dollar for not less than 15..20 figures (the rise of EUR/USD and the decline of USD/CHF).
I would like to say once again that though scenario v.1 for the euro and Swiss franc has been relegated to the background it isn’t cancelled yet (refer to The review of the bigger Time-Frames (Annual Wave Analysis, 2008)).
II. USD/JPY
The Japanese yen didn't stand back from the European currencies and crossed rather significant levels — 101.67 (the ending of wave [D] of IV) and 101.23 (the ending of wave [B] of IV), thus having distorted the geometry of global horizontal triangle (refer to Figure 6).
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Figure 6. Wave counting on the USD/JPY monthly chart. Variant 3.
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It means cancellation of scenario v.1 and a switch to either scenario v.3 (refer to Figure 7) or to modified scenario v.1m, which supposes further forming of wave [E] of IV in the form of an extended horizontal correction. Both scenarios were considered in detail in Wave Analysis (refer to The review of the bigger Time-Frames (Annual Wave Analysis, 2008) and the articleUSD. A pause or the end of a black streak?).
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Figure 7. Wave counting on the USD/JPY monthly chart. Variant 3.
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In the framework of scenario v.3 global triangle IV is completed and at the moment the ending wave V of global downward impulse is forming.
Ideally the price must descend below the 79.78 mark (the ending of wave III). The nearest projective area of the ending of wave V (if this wave doesn’t decide to form an extension) lies in the range of 77..67.
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Figure 8. Wave counting on the USD/JPY weekly chart. Variant 3.
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One of the possible variants of counting of the ending impulse V supposes that at the moment wave [3] of V is forming. Fibonacci levels for its possible completion are marked on the chart. The area of projective values for the completion of impulse V should be defined more exactly after wave [4] of V is completed.
Thus at the moment scenario v.3 considered previously seemed to be most probable. It supposes further dollar’s decline of not less than 15..20 figures (the decline of USD/JPY).
III. GBP/USD
Unlike the previous currency pairs the British pound preserves possibility of further price movement according to any of the three scenarios considered previously (refer to The review of the bigger Time-Frames (Annual Wave Analysis, 2008)).
The main question for the pound at the moment is not the choice of possible scenario v.1, v.2 or v.3 but the confirmation of the completion or further developing of a large upward zigzag marked in Figure 9 as zigzag (A)-(B)-(C).
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Figure 9. Wave counting on the GBP/USD monthly chart.
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If we suppose further dollar’s decline of not less than 15..20 figures in the currency pairs considered previously such a decline will necessarily affect the GBP/USD pair. And if this pair moves practically synchronously with the other pairs it may mean forming of the ending leg of zigzag (C) and forming of a zigzag with practically equal legs.
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Figure 10. Wave counting on the GBP/USD monthly chart. Variant 3.
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Wave counting on the weekly time frame doesn’t rule out further dollar’s decline (the rise of GBP/USD) for 15..20 figures synchronously with the other currencies considered above. This is possible if we suppose that wave 4 of (C) in the form of an expanded wave flat has completed recently and at the moment first waves of the ending wave 5 of (C) are forming. The latter wave may assume the shape of an impulse or a diagonal triangle.
I consider such a scenario of the further dollar’s decline to be the most probable at the moment.
Reference
Dmitry Voznuy
forDmitry@yahoo.com
March 29, 2008
When using any part of the article for publication or analytical materials reference to the author and Alpari is obligatory.
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