EURUSD Elliott wave analysis – corrective pattern emerges below 1.13

A bearish corrective pattern emerges on the EURUSD chart. The price might advance toward 1.13 before facing a resistance. The following EURUSD Elliott wave analysis shares technical insights.

January 06, 2020| AtoZ Markets – EURUSD ended 2019 above 1.12. The bullish resurgence from 1.088 has been able to endure sharp dips. However, the long-term bearish trend appears to remain intact, at least for now. There is a strong likelihood that the recovery from 1.088 will be limited at 1.13 or below. Just below 1.13, the bulls will have to overcome the 1.125 resistance level which doesn’t really look insurmountable with the current market technical structure. To start the year, EURUSD price dropped to 1.1122 after losing over 100 pips. However, a minor recovery has ensued toward 1.12. It now remains to be seen whether there will be enough bullish momentum to push above the 1.13 critical level.

The USD has been at the backfoot with the current market instabilities caused largely by the ongoing US-Iran crises. The USD ISM PMI data came worse than expected last week before the FOMC meeting on Friday. The Fed seemed to have no intention of changing rates anytime soon. However, it might change its position with the current geopolitical conflicts which might weigh on global growth. On the short term, the market will focus on the US employment data coming later this week. The EU, on the other hand, will work on agreeing on an exit deal with the UK later this month.

EURUSD Elliott wave analysis

The EURUSD price has moved around 1.12 steadily since December. The current recovery should break above the 1.1238 intraday resistance level. However, there seems to be a barrier between 1.128 and 1.13 with a reversal bearish pattern emerging. In the last update, we looked at the rally from 1.088 completing a corrective bullish zigzag pattern. We used the chart below (Charting tools from Trading View).

The first leg – wave (a) of the zigzag pattern ended at 1.118. Wave (b) ended at 1.099. If the zigzag pattern is confined within a channel as the chart above shows, there will be a rejection at 1.128-1.13 critical resistance zone. However, a reversal pattern completing at the zone will give us stronger ground to assume that EURUSD will resume the bearish trend from a technical perspective. Meanwhile, the new chart below shows an ending diagonal pattern ensuing as the wave (c) of the zigzag pattern.

EURUSD Elliott wave analysis

If the 1.128-1.13 offers resistance, EURUSD price could resume the bearish trend. On the other hand, a sharp break above the roof of the channel will signal bullish continuation toward the next resistance level at 1.152.

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