EURUSD is retreating around 1.115 after the UK elections powered a surge to the 1.12 handle. The following EURUSD Elliott wave analysis looks at what could happen next.
December 16, 2019 | AtoZ Markets – After the UK elections last week, EURUSD surged to 1.12 as the Conservatives won with a majority. The idea was that Brexit will happen quickly and the burden will be lifted off the Euro. With the surge, EURUSD gained 1.78% (195 pips) in December after a sideways November. However, the market dropped before the week closed. EURUSD dropped to the 1.11-1.115 resistance-turned-support price zone. A minor bounce has followed and EURUSD currently trades at 1.114. Despite the surge, however, the currency pair remains in the bearish territory.
In the last ECB monetary policy meeting – Largarde’s first, the new president of the bank mentioned that the easing policy will continue. However, questions arose on how long this will continue especially if Brexit is finally done in January. The next ECB meeting will, therefore, be critical. This week, she will speak in Frankfurt on Wednesday. The market might want to decipher monetary policy idea especially if she says anything related. Meanwhile, earlier today, the Euro-zone Flash PMI data came disappointing. EURUSD, which was trading around 1.1150 prior quickly dropped to 1.1125. However, the effect was very small and the pair quickly recovered toward 1.1150. The market will now focus on the US Flash Manufacturing PMI data. Afterwards, there are no high-impact events in the economic calendar this week. Broader market sentiments should drive prices.
EURUSD Elliott wave analysis
EURUSD violated a bearish wave development last week after it touched 1.12. Prior, the 1.118 resistance level has held for over 5 weeks. With this violation, it’s becoming more difficult for short-term sellers to hold a reasonable position. With the break above 1.1180, EURUSD price might surge to 1.125 resistance level. However, buyers should be watchful of price reaction at 1.11 if the current dip goes lower. In the last update, we used the chart below (Charting tools from TradingView).
The 5th wave of the long-term bearish impulse wave from February 2018 was emerging as an ending diagonal pattern. However, until the diagonal completes, it’s no diagonal yet. The pattern would also become invalid above 1.118. The late last week surge to 1.12 thus invalidated this wave pattern formation. However, the long-term bearish trend is not yet broken. The new chart below shows the surge from 1.088 could be another corrective bounce.
The EURUSD price is currently being resisted at 1.118-1.12. If a break eventually happens to the upside, another resistance zone at 1.125-1.13 is waiting. If a zigzag pattern happens at the zone, short-term sellers might have to look for opportunities to 1.099-1.1 and 1.088 or below.