EURUSD had a mixed reaction to Draghi's speech on Thursday. The following looks at what could happen next based on the Elliott wave theory.
July 26, 2019 | AtoZ Markets - On Thursday, the ECB left its interest rate unchanged against market expectation of a cut. Meanwhile, the institution discussed its willingness to do anything to adapt to the current economic situations. The bank will consider the introduction of new net asset purchases as one of the options on the ground. The event put a bit of pressure on the Euro as it yielded to the USD. The EURUSD, therefore, broke below its 2019 lowest price to make a fresh year low.
After the rates announcement, EURUSD, which was quietly trading between 1.1125 and 1.113, quickly dropped to 1.1106 to make a fresh 2019 low. However, it quickly rallied by about 85 pips to 1.1185. After the event, the price has returned to the pre-ECB level and everything is now back to the normal. The bearish pressure still persists especially with the strong USD not looking back.
EURUSD analysis: important price level
After breaking below 1.118 level early in the week, it was expected that a retest of the same level will happen before the price returns downside. It seems price will break below the 1.11 support level proper toward the 1.105-1.1025 diagonal support zone. To the upside, the most important level remains the 1.118-1.12 resistance zone. Above this zone, the much-expected bullish correction will have started.
EURUSD Elliott wave analysis
We have been following the development of this bearish trend with the Elliott wave theory for many months and it has been quite helpful. The 5th wave is completing with an ending diagonal and a reversal zone at 1.105-1.1025. In the last update, the ending diagonal 5th wave was expected to complete the last leg as the chart below shows.
We expected that ''the price might bounce off the 1.11-1.1115 zone to test 1.118 before dropping further to 1.1050''.This is currently happening as the new chart below shows.
The impulse wave which has now lasted for 18 months is close to a critical reversal zone. Unless price breaks above the wave (v) falling channel from the current price, the bears should push further to the 1.105 target. A big bounce could happen afterwards