EURUSD slumped to 1.11 on Tuesday as the demand for USD increased. The following EURUSD Elliott wave analysis November 5 update looks at what could happen next from a technical view.
November 05, 2019 | AtoZ Markets – The currency pair dropped below 1.11 on Tuesday as a result of the big gains in the US stock markets. The demand for the USD increased as the stock markets indices in the US hit record highs. EURUSD returned from 1.1175 after last week surge following the FOMC reports. However, the rally was resisted at the 1.1180 resistance level. Thereafter, the currency pair remained within the 1.1175-1.113 range for the next 24 hours before starting a fast dip on Monday. At the beginning of the New York session on Tuesday, the price fell below 1.11. The next barrier is the 1.106 support level.
The US-China trade deal is back at the centre of the market. The two countries plan to officially sign the trade deal. There has been some iota of doubts but the two parties have expressed optimism. As a result, the market is riding on this. EURUSD has broken below the channel of the 3-weeks old bullish correction from 1.088. It remains to be seen whether this will go deeper to break below the 1.106 support level before the 1.088 critical support level. On the other hand, there are still resistance levels at 1.1175-1.118 before the Fibonacci resistance zone at 1.125-1.13.
EURUSD Elliott wave analysis November 5 update
In the previous updates, we identified two scenarios. When the bears couldn’t push below the 1.11-1.106 support zone, we expected a surge toward 1.125 and its neighbourhood as shown in the last update. However, the surge was truncated just below 1.118. At the current level, what are the most likely scenarios? (All charts used below are TradingView charts)
The scenario above identifies the rally from 1.088 to have completed an impulse wave at 1.1176 with a truncated 5th wave. A 3-wave dip should follow to 1.1-1.1028 where we have a strong Fibonacci support zone. Around this zone, fresh demands could resurface to 1.13 or above.
2nd and 3rd Scenario
If the dip is supported at 1.106, there is a likelihood that the bullish correction from 1.088 will get larger and more complex i.e wave W-X (in blue). If there are bullish signals at 1.106-1.107 and the price bounces to 1.11, fresh buying pressure should push above. However, if a fast dip happens below the support zone, we will focus on the first scenario above. Alternatively, a bearish impulse wave to 1.088 will mean that the bullish correction has already ended at 1.1175. Short term speculators will have to be patient to see which of these scenarios will play out and then strategically find an entry when the road is clear.