The week started with a large gap down from 124.21 to 122.71. I expect support at 121.52 will protect the downside as this gap is closed. Gaps are not that common in the foreign exchange market and they are almost always closed immediately. As we regard the decline from 126.04 as wave ii of 5 it should also warrant a close of the gap soon as wave iii of 5 higher takes over. The only demand we have to wave ii of 5 is, that it does not break below the start of wave i of 5 at 118.73 as that would invalidate our bullish count. On the opposite side we would like to see a break above 124.21 and more importantly a break above 125.79, which will confirm the next rally higher in wave iii of 5 towards 133.54.
Here too we saw a big gap down in this cross and the trading week began. I expect the gap down from 1.5776 to 1.5704 will be closed soon. That said, the failure to hold the break above 1.5878 is a sign of underlying weakness as we should watch out for renewed weakness once the gap is closed. The failure break towards the upside keeps the triangle scenario alive and therefore a trust out of the triangle towards the downside is still the most likely outcome here. A break below 1.5600 will call for a decline to at least 1.5390 and likely even down closer to 1.5200. To change this scenario it will take a break above resistance at 1.5934.
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