I wrote below that a breach above wave B at 1.5141 would confirm the bullish count. It should be 1.5145.
To confirm the bearish count, a breach of 1.3334 (wave 1 of this current leg up) would be the first clue that the move up was corrective only since there would be a 4-1 wave overlap.
Here's a look at the EUR/USD 20 year period monthly and weekly. Longer term, it's looking really bullish.
Using the basic tenets of EW and using a very simple approach, we know that the first three waves of impulses and correctives are simply that, three waves;
1-2-3 for an impulse with a subwave sequence of 5-3-5
a-b-c for a corrective again with a subwave sequence of 5-3-5
Examining the count off the 2000 low through the 7/2008 top, this is a textbook 5 wave impulse up. The question becomes are we dealing with the start of a larger impulse (five waves) up or correction (three waves)?
For trading purposes, this doesn't matter as when trading waves 3s or Cs, we are trying to profit from the third wave sequence of this move whether it is a wave 3 or C.
After the 7/2008, top, we have a clearly defined three wave move down with Fibonacci retracments being met, 50% in this case, which is typical for waves 2 or B.
Looking at the monthly chart we have a positively trending MACD histogram and a buy signal right around the corner.
Apply that to the weekly chart where there is a positive MACD divergence the count looks very bullish and may support the beginning of a wave 3 or C up.
The subwaves of waves 3 or C are basically five waves; 1-2-3-4-5. Those five waves subdivides as 5-3-5-3-5.
Right now I show three waves up off the 1.1874 low on 6/6/10. I believe these are the first three waves of the 5 in the subdivision above. If this proves to be correct, we should see the remaining -3-5-3-5 sequence higher. One possible target for this first 5 is the top of the green channel.
Now for the alternate scenario. You need this to understand if your preferred count is incorrect? How will you know you are wrong unless you can identify what the other possibilities are?
Shorter term, I will know that the current count is correct if wave B (1.5141 on 11/29/09) is breached to the upside. However, if the market breaches the end of wave C (1.1874) it is possible wave 2/B is still in progress.
Keep in mind there is a possible head and shoulders formation building and wave C (the one I currently have complete at 1.1874) may extend further to achieve equality to A near 1.16 and 1.618 ratio to A near .95, which would support the head and shoulders formation. However, I'm favoring the bullish count more at the moment because of the monthly and weekly MACD.