At the time of last week’s analysis the EUR/USD was trading at 1.33898. Our long term bullish outlook hadn’t changed as we were still anticipating a long term rally that would trade towards and potentially beyond the swing high of 1.51437. Our bias called for the EUR/USD to retest its lower trendline as the lower timeframe momentum indicators had signaled that the bearish momentum may not have been completed. The indicators were mixed and we anticipated the EURUSD may trade within the trading range of 1.35077 – 1.34560 & 1.32119 – 1.31456. Our exit strategy called for a rally and close above the target zone of 1.34683 – 1.35077 as this would signal the potential start of a larger rally that could retest the 200 period moving average. The EUR/USD rallied to a high of 1.34851 and then declined to a low of 1.32810. The EURUSD closed the week at 1.33842 and came within 50 pips of retesting its lower trendline as we anticipated and its weekly high was also within our bullish target zone of 1.34683 – 1.35077. In our timing analysis we’re anticipating a major swing between 12/17/11 - 12/19/11 (there’s a factor of +/- 2). Our analysis of price and time allowed us to anticipate a decline of approximately 200 pips.
Our long term price analysis still remains bullish as the EUR/USD is still trading within its Bullish Pennant. The manifestation of the waves within the pennant appears to be unfolding in a larger degree 5-wave corrective pattern. This larger degree 5-wave corrective pattern is normal for a Bullish Pennant formation. Our long term bullish outlook hasn’t changed and we’re still anticipating a rally that will trade towards and potentially beyond the swing high of 1.51437. The manifestation of the rally from 1.31456 suggests that the decline from 1.49385 is more than likely a completed corrective decline. Our bias calls for the EUR/USD to trade within a choppy (sideways) market over the next few trading days. It appears the EUR/USD has begun to trade within a minor wedge / triangle. With this minor wedge / triangle we’re anticipating a short term rally towards the bullish target zone of 1.35077 – 1.35470 and then a subsequent decline towards the bearish target zone of 1.31721 – 1.31448. Our exit strategy calls for a rally and close above the target zone of 1.35470 – 1.36129 and continue towards the bullish target zone of 1.37932 – 1.38570.
The rally from 1.31456 still appears to be unfolding as the 4th leg of the pennant and the decline from 1.42463 is potentially the second leg of the corrective 4th leg. We are still expecting a 4th leg that will rally towards the upper trendline. The minor weekly momentum indicator is still bearish and signals the bearish momentum may be coming to an end. We’ll be watching the indicators much more closely looking for additional clues and potential signals of a failed Bullish Pennant during this week’s chat room sessions.
Trading pennants can sometimes become very tricky and somewhat difficult. A suggestion would be to focus on the lower timeframe charts and look for a completion of a bearish pullback or retracement. The completion of the bearish pullback or retracement will be a signal that the higher timeframe bullish momentum may be resuming.
With the EUR/USD trading within a Bullish Pennant, our long term timing projections allow us to anticipate a potential breakout of its Bullish Pennant may occur between 3/4/12 & 3/18/12 (there’s a factor of +/- 2). Our short term timing projections allow us to anticipate a minor swing (turning point) between 12/17/11 - 12/19/11 (there’s a factor of +/- 2). Timing projections allow us to be prepared for and to anticipate potential turning points in the marketplace.