EURUSD is returning to 1.12 after bouncing above it on Wednesday. What could happen next? The following give insights based on Elliott wave theory.
April 04, 2019. AtoZ Markets - EURUSD dropped close to 1.1175 support on Wednesday. The ADP non-farm employment change and the ISM Non-manufacturing PMI from the US came worse than expected and the Dollar dropped across the board. EURUSD quickly rallied to hit 1.125. However today, the price has dipped slightly from 1.125 to 1.122 ahead of today's ECB March monetary policy meeting accounts.
In spite of the rebound from 1.12, EURUSD is still under bearish pressure. However, the price is close to a reversal zone where a corrective pattern could be followed by big rallies in the coming weeks. Fundamentally, disappointing economic readings from the Euro-zone, with the latest being a 4.6% decline in the German factory order, will likely mount more bearish pressure. However, the current economic data have had very little impact on the short-term price deflections. The bearish sentiments still exist but will be put to a test when the price hit the major reversal zone.
EURUSD important price levels to watch
The major support and resistance levels are 1.1175 and 1.145. A bridge below 1.1175 will test another strong diagonal support zone at 1.1150-1.1160. If the bulls push at this zone, we should expect bigger rallies above minor resistances 1.127 and 1.133. Besides 1.145, the price will retest resistance levels at 1.1515 and 1.1570 if an upside move emerges. A dip below 1.115 would see price targeting 1.11.
EURUSD Elliott wave analysis
From the Elliott wave theory perspective, the EURUSD price is close to completing a bearish impulse wave that started at 1.255 in February 2018. This impulse wave has lasted for more than a year and is completing a diagonal 5th wave. Price's response to a diagonal 5th wave is often very sharp. In the past updates, we have been looking at the 5th diagonal which is about to complete its last leg. In the last update, where the chart below was used, we expected a push above 1.13 before this pattern complete below 1.1175.
The bounce didn't happen as the price dropped slightly below the 'blue' support zone. What next?
A triple zigzag pattern could complete the 5th wave of the diagonal pattern. Price could also bounce off 1.1175 support to make a double low. This currency pair is getting close to complete a bearish impulse wave that has lasted for more than 13 months. Reversal zone remains at 1.115-1.116. If price bounces off the reversal zone to 1.125, further rallies to 1.18-1.21 could follow in a big 3-wave bullish correction.
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