After careful study of the price action since early December, there are 2 counts we are following. We are favoring the count as the sub-waves match up cleaner. This implies a medium term outlook in that a red circle wave iii higher started from yesterday or will do so over the coming days. Breaking above the purple trend channel and moving above 1.0950 is key to increasing the odds we are in red circle wave iii higher. See the pre-NFP post we made from early December for the longer term wave labels.
Yes, that count would imply a break above 1.1090 which we've highlighted as a critical level for bears and would suggest a retest of 1.17. Perhaps the wave count is providing us an early warning signal of the move.
The alternate count is a count and is noted in orange. The sub-waves don't line up as well, but it is still being considered.
Sentiment is tracking nicely for the long count. We were a little concerned on January 5 that sentiment was providing a mild signal. However, it has now flipped to providing a mild signal since the current reading is -1.27.
Through the NFP release tomorrow, watch the real time sentiment reading to provide clues about the near term direction. If the reading grows more negative, look for prices to move higher. If the reading moves more positive, look for prices to fall. Watch sentiment in real time HERE.
Back to business. Now that price is on top of the purple resistance line...we're in a zone where price may struggle for further gains. If prices fall hard from here, that could mean this up move might be another (x) wave leading to a (z) lower.
Above the (x) wave high near 1.1000 will negate the (z) wave interpretation. Above 1.1000, we likely break 1.1090 which means a potential retest of 1.1700 over time. Not guaranteed, but as mentioned in the original comments, this could be an early warning signal for a bull run. Sentiment continues to run more negative...now down to -1.56 which helps the bullish case.
There are 2 main ways I look at it:
1) Raw figure in extreme territory -> +/-2 is when it starts to get extreme
2) Shift in sentiment -> something going from +1.1 to -1.5 (like what we've seen in EUR/USD lately) is an example of shifting sentiment.
Back in Dec, the most extreme it got was around -1.8. There was strong resistance at 1.1090 and it just couldn't break.
Thank you for the comment PaQu.
There are several possibilities at this point, a break of support or resistance levels will help clean up the counts. Cheers!