EURUSD has been hit further after the ECB president admitted the possibility of rate cuts. The following technical forecast is based on the Elliott wave theory.
June 18, 2019 | AtoZ Markets – Draghi’s words have sent the Euro-dollar currency pair below 1.12 for the first time in June. He said that the Bank looks forward to cutting the interest rate despite the deposit rate being in the deficit. He added, while speaking in Sintra Portugal, that negative interest rates will be in the interest of the bank and the Eurozone as it has proven to be very important in the past. He, however, stressed that additional measures will be taken if the outlook continues downbeat. The ECB annual conference will continue tomorrow as the market look forward to the FOMC on the same day. Similar rate cut decision is expected from the Fed Reserve when they meet on Wednesday.
EURUSD tanked below 1.12 on Wednesday after the rate cut statements from Draghi. The currency pair has yielded to the bearish pressure after a strong effort to break away to the upside. 1.12 is a strong intraday support level after it held as a critical level in late May and early June. A strong break below will see price heading to the 1.11 handle and the 1.105 critical reversal level. Price could go sideways or correct a bit above 1.12 as traders take caution ahead of tomorrows FOMC rate decision. Meanwhile, unless a break above 1.1348 happens, EURUSD could drop further to 1.11 or below.
EURUSD Elliott wave analysis
The current dip is part of the 5th wave of an ending diagonal pattern. The diagonal pattern is expected to complete the 5th wave of a bearish impulse wave pattern that started in January 2018. It is until the 5th wave is confirmed to have completed and price react accordingly that we can start the talk of a long term bullish correction to 1.18-1.21. In the last update, we looked closely at the 5th leg of the diagonal expected to complete with a 3-wave dip to 1.1050. The chart below shows the sub-wave of the current dip and what is expected next.
Wave a of (v) is about to complete from 1.1348. This could extend to 1.1150 before wave b correction to 1.1250 and its neighbourhood. Wave c should continue to 1.105 afterwards and then complete the 5th wave of the bearish impulse wave that has lasted for about 17 months.