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EURUSD: Brewing a Countertrend Rebound

Price could be forming an Ending Diagonal.

If the Ending Diagonal pans out, from the May high we could count a large 3-wave down leg. Even if it is not impulsive it would be too premature to consider the correction over but a large countertrend rebound could reach the highlighted target box (0.382 R=1,2981 - Weekly gap fill = 1.3246).

EUR Weekly Chart
Larger Image

Next in the daily chart we can see that in addition to the scenario of a potential Ending Diagonal, if 1.2355 holds price could have truncated the wedge opening the door to a Double Bottom.

Keep in mind that when an Ending Diagonal is completed it is usually followed by a sharp advance retracing at least back to the level where it began = 1,2888 and often much further (Target Box 2).

EUR Daily Chart
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However, since we cannot rule out that the Ending Diagonal still needs a new lower low, the current pullback MUST establish a bottom no lower than 1,2424 (Higher low) from where it would begin a new sequence of higher lows/highs triggered by a likely short squeeze.

EUR 60-Minute Chart
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