EURUSD is sideways after dropping over 70 pips post FOMC. What next ahead of the NFP tomorrow? The following technical forecast is based on the Elliott wave theory.
May 02 2019 | AtoZ Markets - During the FOMC meeting on Wednesday, EURUSD dropped 60 pips in just 15 minutes. The rates remain unchanged and the FED reiterated its plans to keep it that way till the year ends. However, amidst a reduced inflation rate in the first quarter, a robust economy and a strong Dollar; investors and traders were concerned the Fed will reconsider its decision sometimes in the year. Chairman Powell about rate change says ''We do not see a strong case for moving in either direction''.
The buck has since been dominating other currencies after suffering weaknesses across the board following last Friday's US GDP report. The currency pair has lost almost half of the gain from 1.111 last week low. Currently trading around 1.12, the employment data from the US tomorrow will provide more short-term answers.
EURUSD Elliott wave analysis and important price levels
For many weeks, we have looked at the bearish impulse wave that started over 14 months ago. This impulse wave pattern completed at 1.111 with an ending diagonal 5th last week (late April). According to the Elliott wave theory, a 3-wave correction in the opposite direction (bullish in this case) should follow. This means EURUSD price will likely hit 1.18-1.21 in the coming months.
Price started the expected bullish correction and surged to 1.1265 with a trending intraday pattern. We expected the first sub-impulse wave break out from 1.111 to extend to 1.13 as the chart below, used in the last update, shows.
The rally was expected to continue to 1.13 before a bearish correction. However, the Fomc caused a bearish spike to 1.12 and will now make us assume the first breakout wave has already completed at 1.1265. The current dip is a minor 3-wave correction that should precede another big bullish breakout above 1.1265.
The intraday bearish correction could continue to 1.116-1.1175 before returning upside. The bullish setup above will be invalid below 1.111. If the price moves along the wave forecast above, wave iii is expected to extend above 1.132 after the end of wave ii is confirmed. Wave ii dip must not be deeper than 1.111.
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