High expectations regarding a single word and a news event are hardly ever the starting point of a new trend, but they can well ignite a short covering rally against a bear the trend. It is also common to to see a news event cap a correction resuming a larger down trend, but not so much to reverse it.
By Monday’s high we had an A wave, then very likely a triangle wave B while waiting for the FOMC verdict. Now it seems a massive group of traders and investors sensed the FOMC minutes as risk from the dollar perspective which ended up in a buying euphoria propelling a 5th wave extension of wave C. The overall height of the structure is larger than any rally since the trend began which suggests that this trend might be aging and has stepped into the deceleration phase. This transformation is due after the series of weekly selling climaxes we’ve seen over the past month.
Until today’s trading we had a couple of other interpretation on the table, but this corrective labeling emerged with bulls giving up awfully fast. The rally and the almost equally strong setback with the 100% overlap of bars are typical traits of a ranging market. My take is that EURUSD has entered a trading range and we will see prices soon taking out both the high of Wednesday trading and the low of 1.0462 from last week. Note that the wave count considers the “FOMC rally” as only the first leg of a much larger (or wider) correction.
The daily and the weekly time-frame remains sustainable bear.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.