EURUSD broke above an intraday range on Thursday amid concerns on the trade talks between US and China. The following share insights based on Elliott wave theory.
May 09, 2019 | AtoZ Markets - EURUSD hit close to 1.125 on Thursday after breaking above the 1.115-1.1215 intraday range. After dropping to 1.1133 last week, this currency pair resumed upside before going sideways. The US PPI data met market expectation. The US and China have continued the trade negotiations after US President threatened higher tariffs on Chinese products based on claims that ''China broke the deal''.
If the trade deal is not resolved, there will be more pressure on the USD and the sell-off could continue as investors look forward to safe-haven currencies and commodities. Price is still far from the 1.1265 top after the late April bullish breakout.
EURUSD Elliott wave analysis and important price levels
From Elliott wave perspective, the bearish trend that has lasted for over 14 months ended late April at 1.111. The resultant first rally was swift. However, that was followed by a sharp decline after a much-improved employment data in the US. From 1.111, a bullish impulse wave would be required to start recoveries to 1.18-1.21 price targets. How has price moved since the first run to 1.1265? In the last update, we used the chart below.
After the first impulse wave rally to 1.1265, the price completed a sharp corrective decline to 1.113 and followed by another rally to 1.12. If wave i ended at 1.1265 then wave ii ended at 1.1133. Wave iii was expected to resume with a break above 1.12 and 1.1265. Only a break below 1.1133 would invalidate this wave count. The sub-wave 2 (circled) of wave iii didn't complete the last leg before breaking above 1.12. Price went sideways afterwards before the recent upside break. Here is the new update.
The bullish trend will be confirmed by the break above 1.1265 as wave iii continues. Wave iii is expected to extend to 1.15 before the next big dip (wave iv). On the contrary, a fast dip below 1.1133 is not good for this bullish development and could turn the short-term bias bearish.