The European major has nicely corrected towards the rising medium term trendline – just below 1.47. In all likelihood, the euro will witness a bounce this week from the current levels back towards 1.4950-1.5020, which puts the very short term preferred strategy towards euro buys with tights stops below 1.4625.
That said, the impending rally may not extend too much beyond 1.5050 from a macro picture - even if it does extend it would only offer opportunities for shorting the pair or exiting out of current longs as a test of 1.4430 seems reasonable after the current rally.
STERLING
Since the last report, pound has marked gains although missing our target of 1.6740 by a cent. There is no reason to alter our bullish view yet, as it continues to stay bid above 1.61-1.62.
From an Elliot perspective, the 4th wave has probably concluded putting the odds for a shoot towards 1.74-1.75 to complete the 5 wave sequence in the coming weeks. Break above 1.6740 will confirm this bullish count.
Preferred Strategy: Longs with stops below 1.6150
Dollar/ Rupee
The dollar as expected retraced into the mid 47 before turning again. As noted in the last report, so long as price action remains capped below the falling trendline resistance, now at 48, bias would be in favour of the Indian unit with rallies offering opportunities to short the dollar for a move again towards 45.50 - 46.
Dollar Index
In the current week, we could see the dollar index dip again towards 74.15 from the current 76.20.
However, from an Elliot (macro) perspective, the dollar index appears to be in the last wave , namely the C wave in the broader A-B –C corrective sequence. If this wave count is true, the corrective C wave should ideally terminate around 73-74 and head for a multi week rally.
A convincing breach above the pink line - (50 day EMA) would be needed to confirm this reversal.
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