Has the euro topped this morning?

The US government shut-down has triggered a knee-jerk flight out of the dollar and the euro has rallied to within pips of the 136 handle – and has traced out a very rare chart pattern – an expanding triangle:

Usually, triangles are contracting, where the tug of war between the bulls and the bears settle down to some sort of compromise with volatility also contracting.  And breakouts of the triangle are usually sharp – and offer great trading opportunities.

But in an expanding triangle, the disagreement between bulls and bears gets wider and wider – and volatility ramps up. This pretty much sums up how traders feel towards the euro from a fundamental perspective!  With Greece – and now Italy – lined up for more bail-outs, the odds are increasing for the ECB to start a QE programme.  This would devastate the euro.  The dollar has run thought its QE expansion already and has discounted it.

The downside for the euro is huge – my long-term first major target is the 1.28 area, with much lower values in prospect.  So getting on board a short euro trade at the right time will pay off handsomely.

Here is my EW count for the leg up from the 6 September low (above chart).

But the fifth wave also has a five up:

Not only that, but this fifth wave also sports five waves:

This fractal exercise can go on almost forever!

Now, with the upper triangle line having been hit this morning – and the huge back-off to the 62% retrace, the market is consolidating.

My best guess is that the top is in and we are forming w1 and w2 of the leg down – to the lower triangle line in the 1.35 area.

Breaking this level would indicate the top really is in and to start trading short.