The sell off from this morning has popped outside of the purple channel. Therefore, it appears to be a smaller degree wave 'x' and we are working on a wave 'y' higher. Based on wave relationships, this places a potential reaction zone in the 1.14-1.15 area.
This runs a similar pattern to the GBPUSD we wrote about last week.
Traders can place their risk above the Aug 24 high while targeting new lows below 1.08.
There is an alternate view that suggests we are in a larger degree (X) wave that likely digs deeper. A move above 1.15 will enhance this count.
Sentiment is running with net sellers going into the FOMC meeting tomorrow. Be mindful of your trade size as volatility is likely to pick up.
I love your question MirkoMan! That shows me you are really thinking about the EW count and that you are trying to justify it in your own mind rather than taking it at my word. Certainly use my counts as spring boards of thought.
Now, specifically to your question, divergence in the 5th wave is a characteristic of the wave, but not a rule. It is a symptom to alert you that a 5th wave could be upon us...but that symptom doesn't have to be present for the wave to be a 5th wave.
Think of it like being sick. When you don't feel good, you go to the doctor and the doc asks you several questions to determine what the symptoms are to then make a diagnosis. There may be several symptoms he/she is looking for:
-stuffy nose
-head ache
-coughing
-sore throat
-etc
Could one person have the flu and show only 2 of the symptoms? Sure. Could another person have the flu and show the other symptoms but not the same 2 symptoms as the first person? Sure. That is the same scenario when dealing with the characteristics of waves.
5th wave divergence is one thing we look for as "chart doctors".
Other items (among other things) I look for are wave relationships and wave measurements. I've shared a smaller time frame chart (1 hr) to illustrate how some wave relationships have lined up pretty well giving me confidence as a doctor of the 5 wave move. (See the tan notes associated with the red dotted horizontal lines.) If those wave relationships didn't exist, I would then lean heavier on alternate counts.
Does this answer your question?
FutureMeDead
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I agree with JWag here. Additionally, divergence is less likely to be present in small degree wave counts. All in all, sometimes we are not afforded clarity.
DavidRoberts
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Hi Jeremy.....just back from Holidays! Do you think this is to late to get into now or that there is still enough wave 3 potential there? Perhaps if it breaks below 1.1080 ish?
JWagnerFXTrader
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Hi David - welcome back! You should be getting a fresh look at the charts after having some time away.
So long as resistance levels hold, we can continue to look lower. Prices may retrace to 1.12 but would need to stay below 1.1270 to keep the 3rd wave interpretation as the preferred view. A wave 3 should ultimately break 1.08 and pressure 1.04.
ChatchaiVong
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please , update EU
thank so much
rick.alter.35
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hey jwag ... same wave count as you..think we're in a triangle now for your purple circle wave 4??
Cainara
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The trend on the weekly and monthly chart for this currency pair is high. So let's take advantage of an opportunity to enter into a low as possible and thus achieve higher levels of TPs.
JWagnerFXTrader
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Hi Cainara - I appreciate your input. Best of luck!
BTW - it looks like you have the Great Wall in the background of your picture. What part of the wall were you at?
Cainara
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My wife and I were in a part of the wall next to Beijing. Look my work in Brazil tourchapada.com. You are my guest.