Euro dropped about 200 Pips (-1.7%) last week against the dollar after being resisted at 1.155. The dip was unable to break below 1.13 handle before a surge back to 1.14 today.
October 2018 | AtoZMarkets - Last week, EURUSD dropped to 1.133 after breaking below 1.143 support level. It later closed the week a bit above 1.4. This week, however, has seen the bearish move continued to 1.136 after the breaking news of Angela Merkel's (German Chancellor) quit as the head of Germany's Christian Democratic Party which she headed for 20 years. Price didn't take much time to recover as it went back to 1.14 raising bullish suspicion. From a larger degree Elliott wave perspective, this currency pair is in the 5th wave of a year-long bearish impulse wave. The 5th wave was expected to lead price to 1.12 or even 1.11 according to the last forecast. In this update, we will continue with this forecast.
EURUSD Elliott wave Analysis and Important Price Levels
The chart above looks at EURUSD from 1.181 (late September). Price drop from 1.162 was expected to be an impulse wave. At the moment, price has not covered enough ground to ascertain this expectation. From 1.181, price has been making lower lows and lower highs. This suggests that the bearish trend is still in firm control. The last lower highs are 1.162 to 1.155 and the last lower lows at 1.1433 to 1.1333. The current rally from 1.1333 is expected to end below 1.155 for this bearish sequence to continue. A fast move above 1.155 and 1.162 is the first sign of bull-takeover. The chart below shows a head and shoulder pattern with base at 1.1333.
At 1.1333, there is an inverted head and shoulder reversal pattern with neckline at 1.142-1.1433. A break above this neckline will see price at 1.1468 Fib level and even 1.15 handle. Price is expected to drop afterwards below 1.1433 and 1.1333 to continue the bearish trend. If price surges further and break above 1.155, we might be seeing the beginning of a bullish end of the year for EURUSD.
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