As we already highlighted yesterday, with this kind of clear ending diagonal on the last 5th wave and daily Doji candle confirmation, retrace up was very likely. This is still a highly attractive trade from the risk-reward ratio perspective. This reversal should draw at least 3 legs up. We are staying strong bullish here, with the target at the beginning of the ED.
Leading diagonal at the wave 1, nice zig-zag ABC pullback pattern for the wave 2, and we are currently tracking the wave 3, which by the Elliott rules should test our highlighted area on the chart (yellow rectangle) 1,61% of the first wave at least. The alternative scenario is that the wave 3 is already finished and that we are tracking now the wave 5.
After the ECB meeting, Mario Draghi’s speech, and lower CPI numbers, similarly as EUR/USD, the Aussie bounce up from the support level. We do expect this pullback to extend higher in the next few days, before final downtrend resume.
CPI number at 0,2% today, withdraw the Dollar index down, but we do believe from the EW perspective that we are going to see DXY extending higher above the previous high for the wave B, before final wave C comes out. The alternative scenario is that DXY is already finished with the wave B and that we are tracking now the final leg C. We will wait for confirmation, with the highly required patience.