Instead of looking at the Euro Index, let’s take a look at the Euro - US Dollar FOREX Pair - EURUSD - and see the current ‘color chart’ along with two sets of momentum divergences and an Elliott Wave count. Sound complex? Let’s look at it step by step.
(Click for full-size image)
We see a daily graph of the EURUSD starting with mid-2008 so we can see the lengthy positive momentum divergence through early 2009 that preceded the rally phase that has taken us to the current levels of 1.5000.
Since then, a lengthy negative momentum divergence has formed, which serves as a non-confirmation of the angular price rise off the early 2009 lows.
The oscillator is a color version of the 3/10 Oscillator I use (information via the link).
The oscillator formed a momentum peak in December 2008, but to compare price to the oscillator, we’ll use the March 2009 peak so we can follow along with the divergence which also corresponds with the stock market rise off the March 2009 lows.
In addition, I’m showing a possible 5-wave fractal Elliott Wave count, in which the final fractal 5th wave itself is subdivided into a 5-wave progression that has reached its peak at one of the lowest positive readings in the momentum oscillator.
Though it’s difficult to see, the 50 day EMA rests at 1.04656, a level to watch for support… or an acceleration of price to the downside if this level fails to hold here.
What remains is a battle between the “simple” form of technical analysis - trend continuation which is bullish - vs the more ‘advanced’ concepts of Elliott Wave and lengthy negative momentum divergences (bearish).
For those who don’t trade or monitor FOREX, you can watch the Euro Index under symbol $XEU in StockCharts.com or most other charting platforms.
For more analysis on the US Dollar Index and broader Cross-Markets, consider subscribing to our Weekly Intermarket Technical Analysis service.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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