Weekly Waves for October 3: EUR/USD, GBP/USD and Natural Gas
Our weekly Elliott Wave analysis reviews the EUR/USD daily chart, the GBP/USD weekly chart, and the NGas 4 hour chart.
EUR/USD Elastic Drop Encounters Rapid Bullish V-Valley
The EUR/USD made a massive bearish drop from about 1.02 to 0.95 in a matter of days but the bullish rebound took the shape of a V-valley reversal:
- The EUR/USD downtrend channel is well established and price action used the support (green) and 0.95 round level for a bounce back up.
- Price action is at a crossroad, where it could use the local Fibonacci resistance levels for a bounce within wave 4 (yellow).
- A bullish ABC pattern could unfold in wave 4 (yellow) before another drop within the downtrend.
- Or price action could break above the Fibonacci levels and challenge again the resistance line (orange) of the downtrend channel and perhaps the 23.6% Fibonacci level of the larger wave 4 (gray).
- When a trend is so extended as the current downtrend, it is always difficult to determine the end of the wave 3 and the start of the wave but a good clue would be 5-7 weekly candles not breaking for a lower low.
GBP/USD 2,000 Pip Decline Followed by 1,000 Pip Rally
The GBP/USD crashed from 1.2250 towards 1.0250 in a matter of days but the bullish reaction was equally intense:
- The GBP/USD made a 2,000 pip decline, which was then followed by a strong 1,000 pip rally. Certainly the GBP does not lack volatility.
- The GBP/USD made a strong bullish bounce at the confluence of support levels. At the 1.0250 support zone there was a -27.2% Fibonacci target (brown) of the wave 5 (gray) and a -261.8% Fibonacci target (orange) of the wave 123 (pink).
- The strong bullish bounce indicates a high chance that the wave 3 (pink) has been completed and that a wave 4 (pink) has started.
- A bullish ABC (yellow) pattern is expected to unfold within wave 4 (pink).
- One more push up towards 38.2% Fibonacci level (purple) at 1.16 is likely (blue arrow).
- A break above the 50% Fibonacci level could place a serious question mark on this Elliott Wave pattern.
Natural Gas Downtrend Prevails But Breakout Needed
US Natural Gas has made a steep decline below the $7 but the the speed of the downtrend is slowing down:
- Natural Gas will need to break (red arrow) the support zone (green lines) for a downtrend continuation towards the -61.8% Fibonacci targets.
- A bear flag pattern followed by another bearish breakout would confirm a potential 5 wave (yellow) pattern within a wave 3 (pink) pattern.
- A bullish breakout above the downtrend channel (blue arrows) could indicate the end of the bearish ABC (pink) and the start of some type of bullish ABC (yellow).
- The downtrend target is aiming at the moment for $5.50 to $6.
- The bullish corrective target would aim for the resistance zone around $7.5-$8.