EURUSD rallied swiftly above 1.125 on Monday while the Dollar weakened across the majors. The following insight is based on the Elliott wave theory.
June 04, 2019 | AtoZ Markets – The currency pair continues to build on last week gain. It broke above 1.1215 key intraday resistance level to 1.1278. Monday’s big surge was the biggest single-day gain for the EUR against USD since late January. The Dollar weakness was seen across the major currency pairs while the Euro was among the biggest gainers. Though the overall trend is bearish, the upward move could gather momentum this month and hit higher prices, breaking barriers on its way. However, there is an alternative look. The Fed chair will speak today but perhaps the biggest movers will come on Thursday during the ECB’s Monetary Policy Statement and press conference, and on Friday, when the US employment data for May is released.
EURUSD Elliott wave analysis and important price levels
From the perspective of Elliott wave theory, EURUSD is expected a make a 3-wave corrective bullish run to 1.18 or even higher. The impulse wave which started in January 2018, was suspected to end with an ending diagonal pattern and a triple bottom reversal pattern at 1.111. The bearish trend lacked enough momentum to break below 1.111 and move toward 1.105 which was the next critical level to expect a bullish reversal. In the last update, we had two scenarios. The first scenario expected a break above 1.1215 to confirm the end of the 5th wave ending diagonal at 1.11-1.111. The chart below was used.
The Dollar fell yesterday and propelled EURUSD upside. The Euro-zone is not still looking good yet but the Dollar weakness, if it continues, could overwhelm Euro short-term bearish sentiments. Thursday and Friday would give more medium-term clues after the ECB monetary meeting and the US Non-Farm Payroll data. While we wait for these, the following shows the new update and what is expected next.
If the diagonal had ended at 1.111, the current rally should continue. A corrective dip to 1.12 or 1.1175 could precede the big breakout.
Meanwhile, from an alternative scenario, the diagonal’s 5th leg was truncated after the support it had at 1.111. The price pattern is still within the possibility of a dip below 1.111 as the chart below shows. Unless a big break to 1.14 happens to invalidate the alternative scenario shown below, the bulls could be limited below 1.13 before the next slump.
The chart above shows wave (iv) could still be under construction. The rule of diagonal says wave (ii) must be greater than wave (iv). The pattern would be invalid if it happens the other way. This means that wave (iv) could continue to 1.135 and the pattern will still be valid. EURUSD still has a tendency to drop to 1.105-1.10 unless a surge above 1.1375 happens to invalidate the alternative scenario above.