EURUSD spiked above 1.13 on Tuesday after a Bloomberg headline that ECB may not cut rates in July. The following also includes a technical forecast based on Elliott wave theory.
July 07, 2019 | AtoZ Markets - The EURUSD currency pair dropped to 1.128 on Monday and started a minor recovery during the Asian session on Tuesday. A big surge above 1.13 would soon happen early in the London session. Why the sudden surge? According to the latest headlines on Bloomberg, the European Central Bank (ECB) will not rush to cut rates in July. The headline caused a minor relief on the currency pair as it quickly gained over 40 pips to hit 1.132. However, the spike did not continue as price quickly returned to the 1.13 important handle.
EURUSD analysis: important price level
There is a Fibonacci support zone at 1.13-1.127. After dropping into this zone before bouncing off, price is returning there again. A break below 1.127 will most probably lead to the 1.12-1.118 support zone. The upside rally is expected to be limited below 1.135. Currently, the price looks bearish and will most likely continue to 1.118 unless a big bullish spike happens. The market will look forward to the June Non-Farm Payroll on Friday for short term clues.
EURUSD Elliott wave analysis
From the perspective of the Elliott wave theory, EURUSD remains bearish from the long term outlook. A bearish impulse wave from January 2018 was noted to have completed at 1.11 with a double bottom reversal pattern. However, the rally from 1.11 to 1.1412 looks corrective. Price has returned to the 1.13-1.127 support zone as expected in the last update where the chart below was used.
The chart above shows two scenarios. If the price drops below 1.127 and hits the support base of the trendline, further dip toward 1.1050 is expected to happen. We can then count an a-b-c leg toward 1.105. Unless price bounces off this support zone the (a)-(b)-(c) scenario should play out. A 5-wave dip to 1.18 as the new chart below shows, can't be ruled out.
If price follows this path, a correction then further dips should follow. Price is still within the bearish region until a big surge happens above 1.14.