Forex

ast quarter, we wrote that “COT data supports an aggressive bullish bias over the next few weeks (at least) as both euro-bearish sentiment extremes and USD-bullish sentiment extremes have recently been registered. This rally could extend towards 1.6000. Currencies have a tendency to sport 5th-wave extensions, which is consistent with a blow-off top, which happens so often in the currency and commodity markets.” Wave v of 3 ended up breaking higher from a triangle, and the advance is either over just above 1.59, or an ending diagonal is underway from 1.5342. In the former scenario, the EUR/USD is expected to come below 1.5342 in a wave-4 correction and reach the 38.2% of 1.3261-1.5904 at 1.4894. If the diagonal scenario plays out, then the EUR/USD will rally a bit higher, but in a choppy manner before declining in the mentioned 4th wave. In summary, risk is to the downside.