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EURUSD Elliott wave analysis: dollar gains bullish traction

Sanmi Adeagbo | May. 15, 2019
EURUSD Elliott wave analysis: dollar gains bullish traction

EURUSD has dropped below 1.12 despite a worse than expected US retail sales data.

May 15, 2019 | AtoZ Markets - The US core retail sales came worse than expected but the USD remains strong across the board. EURUSD tanked below 1.12 and now close to the 1.1175 intraday support level. The US-China trade war remains a big deal for USD investors.

The global market risk-off trades fuelled by China's retaliatory measures to fight back at the U.S is creating more demands for the USD. However, the cautionary handling of the USD by investors is set to continue amid uncertainties. Euro, on the other hand, is currently surrounded by a mood that's not so good. The better than expected Euro flash GDP q/q did nothing to stop the free fall below 1.12. There are no more high impact data this week. The EURUSD near-term direction is expected to be driven by dominant market sentiments and US-China trade talks headlines.

EURUSD price was resisted from breaking above the 1.126 top on Monday. A reversal technical pattern completed and price quickly fell. The larger bullish sentiment is now under serious threat. The current bearish run could continue below 1.111 previous low and hit the lowest price since June 2016 before a strong bullish correction starts properly.

EURUSD Elliott wave analysis and important price levels

From Elliott wave perspective, we expected the bearish impulse wave from January 2018 to have completed with a 5th wave ending diagonal pattern at 1.111. We expected a 3-wave bullish correction toward 1.118-1.21. After the first push to 1.1265 and a corrective dip to 1.1133 followed, we identified a possible end of the 1st and 2nd sub-wave of the impulse wave rally as part of the 3-wave bullish correction. The chart below was used in the last update.

Price was expected to advance as the chart above shows. The rally continued to 1.126 but was resisted and then dropped below 1.12 to invalidate this outlook. There is a need for a new outlook. With the current price pattern, it seems EURUSD will take a new dip below 1.111 as the chart below shows.

If the diagonal had ended at 1.111, a big upsurge should have happened. Big and quick opposite move often follows an ending diagonal pattern. From the chart above, the rally from 1.111 looks corrective and suggests one more low is very much likely to happen before the big corrective upsurge. A dip to 1.1075 is now favored if price stays below 1.126 resistance level.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.