FX.co ★ EUR/USD analysis for January 25, 2013

EUR/USD Elliott Wave
From the start of this week, the EUR/USD pair was trading in a triangle formation, impulsive 4 wave (coloured blue) of the bigger (1) wave (coloured green) was developing. Yesterday during the Asian and European sessions, after this major pair found support at 1.3285 level, (end of the 2 wave) we could observe strong ascending movement toward the 1.3390 area. We can consider this move as the end of the wave (3) (coloured pink). Therefore, during the New York session the EUR/USD pair did not manage to hold this level and the price drooped to the new session’s low at 1.3348 level (end of the 4 wave). At the moment the euro is trading around 1.3431 level against the U.S. Dollar and we are expecting to see a strong pullback when development of the (1) wave (coloured green) ends. In accordance with our wave rules and taking into account that the wave 2 should retrace 50% of the wave 1, we can define the potential targets with measuring wave 1 with take profit at 1.3226 (50% of wave 1). To reduce the risk, we can use resistance at 1.3500 level as stop loss.

Support and Resistance
(S3) 1.3202 (S2) 1.3244 (S1) 1.3309 (PP) 1.3351 (R1) 1.3416 (R2) 1.3458 (R3) 1.3523

Trading forecast
Proceeding from Elliott Wave rules today, the trend is expected to begin the downward movement. That is why short positions at level 1.3480 with stop loss 1.3500 and take profit at 1.3226 are recommended.