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:

1. 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.
2. Price action is at a crossroad, where it could use the local Fibonacci resistance levels for a bounce within wave 4 (yellow).
3. A bullish ABC pattern could unfold in wave 4 (yellow) before another drop within the downtrend.
4. 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).
5. 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:

1. 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.
2. 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).
3. The strong bullish bounce indicates a high chance that the wave 3 (pink) has been completed and that a wave 4 (pink) has started.
4. A bullish ABC (yellow) pattern is expected to unfold within wave 4 (pink).
5. One more push up towards 38.2% Fibonacci level (purple) at 1.16 is likely (blue arrow).
6. 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:

1. Natural Gas will need to break (red arrow) the support zone (green lines) for a downtrend continuation towards the -61.8% Fibonacci targets.
2. A bear flag pattern followed by another bearish breakout would confirm a potential 5 wave (yellow) pattern within a wave 3 (pink) pattern.
3. 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).
4. The downtrend target is aiming at the moment for $5.50 to $6.
5. The bullish corrective target would aim for the resistance zone around $7.5-$8.

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter