With a high at 125.90 there is a good possibility, that the expected X-wave has finished and the downside pressure again is building. That said, we need a clear break below 124.54 to confirm the top and building of renewed downside pressure. Looking at the correction since the 127.70 high, we have seen a zig-zag correction, but I do think it is to small to correct all of wave 3, therefore I'm looking for a new zig-zag correction developing, that would likely take us down to 121.26 as the first target. At 121.26 wave 4 will have corrected 23.6% of wave 3, but a more normal corrective target will be at the 38.2% corrective target at 117.28, which also marks the bottom of wave iv of one lessor degree. For this count to stay valid, at no point should we see a break above 126.95 as a break above here would call for a new rally higher towards 127.70.
Here we only saw a rally to 1.5858 followed by a shallow correction down to 1.5764. The question is, was this correction enough? I will have to say yes, even though the correction could have been deeper. I have noticed in this currency-pair, that wave two can be very shallow and only retrace the absolut minimum. I will now be on guard for a break above 1.5848 that would confirm the next rally higher towards 1.5947 and 1.6088. However, the risk is a break below 1.5764 that would call for a deeper correction towards 1.5745 and possibly even 1.5723 before the next rally high.
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