EURUSD Elliott wave analysis – price breaks 1.11 pre-ECB

EURUSD broke upside after Wednesday’s FOMC meeting. Ahead of today’s ECB meeting, what could happen next? The following includes EURUSD Elliott wave analysis.

December 12, 2019 | AtoZ Markets – Euro-dollar finally surpassed the 1.11-1.1115 critical zone after weeks of resistance and trading below it. This came after some dovish outlook from Wednesday’s FOMC meeting. While the Fed kept rates unchanged in the last meeting of the year just as expected, there were no clues of any change coming in 2020. USD tanked across the board. EURUSD, therefore, closed the American session on the high to complete the 4th consecutive day of profits. Meanwhile, the market stabilized around 1.1145 in the Asian session before dropping to 1.1125 early in the European session. The Euro-dollar might advance further to 1.125 which is the next bullish target. However, much attention will be on the ECB meeting and press conference coming later on Thursday.

Focus shifted to the ECB and the new President

The ECB is having the last meeting of the year. The market will read into what will be expected especially in the first quarter of 2020. The market expects a hold on all the rates. The new ECB president Largarde will come to the limelight. The last press meeting in October was sort of a farewell for her predecessor Mario Draghi.  He introduced several monetary stimulus packages and said in October that the bank will repeat its rates levels and policies on Thursday. ECB’s easing policies are therefore expected to continue. Nevertheless, today is for Largarde’s introduction to the press and there will be much focus on her discussions with them.

EURUSD Elliott wave analysis

Despite the current surge, EURUSD is still in the bearish territory. The bears have dominated since January 2018. The bearish trend is developing into an impulse wave pattern. The 5th wave is getting extended especially in the duration of formation. We also suspected that the 5th wave is developing into an ending diagonal pattern which should break below the 1.088 low down to 1.075. However, the current surge is becoming a threat and has somehow stretched our analysis in the last update a bit. The chart below is the basis of our analysis in the previous updates (Charting tools from TradingView).

The 5th wave diagonal will become invalid if the price rallies above 1.1180. This might lead to wave (iv) becoming bigger than wave (ii) which will, therefore, invalidate the ending diagonal formation. In addition, a break above the wave (ii)-(iv) resistance trendline could stand as a threat. The chart below shows this is currently happening.

EURUSD Elliott wave analysis

The current wave (iv) at 1.118 is a bit less than wave (ii) which still fits into the pattern. If the current surge extends to 1.1196 and above, the diagonal becomes invalid and EURUSD price could advance to the 1.13 handle. However, if the price drops from prices below 1.118 down to 1.104, wave (v) should emerge and drag the price below 1.088.

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