A nested-pattern checklist on the 2005 euro

A teaching case from mid-2005

By late July 2005 the euro sat about 18 cents below its December 2004 peak near 1.37, while political hostility toward the common currency rose after constitutional rejections in May and June.

TradersWeek editorial: the value of this snapshot is the nesting. One weekly Elliott map, one daily head-and-shoulders, and one short-horizon consolidation sit on the same pair. The archive describes the historical workflow. The ordered checklist below is an editorial reading of that workflow, not a claim made by the archive.

Lock the weekly five-wave map first

A weekly Elliott count labels a five-wave advance from near 85 cents in late 2000 to near 1.35 in late 2004. The third wave is described as the extended wave inside a roughly four-year cyclical bull market.

After the late-2004 high, that weekly count treats the decline as an almost-complete A-wave of an A-B-C correction. Support is read near the prior wave-(4) low around 1.20, which is the first wave-four-support test for the opening A-wave.

If the 1.20 area holds as a temporary bottom, the weekly hypothesis anticipates a bounce that tests the 1.30 level. TradersWeek editorial: lock this weekly map before any daily rebound is treated as a new impulse. On this count the bounce is still inside an a-b-c-correction.

Require a daily head-and-shoulders

On the daily chart, an early-July break of 1.20 that reversed about five days later is read as a bear-trap: a brief break of a well-watched support that is quickly reversed, leaving late sellers on the wrong side of a rebound.

After that reversal, a downward-slanted head-and-shoulders bottom is the candidate confirmation for an August rebound. The pattern is a three-swing reversal with two shoulders around a more extreme head. A close through the neckline, the line joining the two troughs, is the confirmation event.

The daily head-and-shoulders bottom is measured at about three cents from 1.22 to 1.19. That measured-move implies a minimum objective near 1.25, where a May downward consolidation sits as the first resistance test.

A late-July hourly higher low versus the mid-July low, together with a running positive-divergence on the stochastic from 22 July through 27 July, is treated as the first step of a possible multi-week advance. Price made a lower low while the oscillator made a higher low. That reading is supporting evidence of a possible temporary bottom, not a standalone trigger.

Define risk only in the short-horizon pause

A short-horizon sideways consolidation after the bounce is used as a reduced-risk continuation pause. TradersWeek editorial: this triangle-pattern is not a standalone trend call. It is the only place in the nested reading used to locate a make-or-break re-entry.

The pause is bounded as a contracting or sideways range. A pivot low at 1.2120 is the make-or-break invalidation. The May downward consolidation near the 1.25 measured-move is the matching place to locate first resistance, not a second trend call.

Keep the unfinished weekly top as the falsifier

The intermediate case for a move toward 1.30 is also the rally that could complete an unfinished weekly head-and-shoulders top. That larger pattern would become official only after a reversal that takes the pair below 1.20.

Measuring down 15 cents from a 1.20 neckline on that unfinished weekly top would place the euro near parity with the dollar if the larger reversal later completed.

TradersWeek editorial: until that weekly neckline gives way, the bounce stays a right-shoulder-rally risk. An advance toward a prior high that later reverses through the neckline would complete a larger top rather than start a new impulse.