EURUSD has resumed decline below the 1.11 critical level. Will it drop further to a new low? The following insight is based on the Elliott wave theory.
August 16, 2019 | AtoZ Markets - After a bit of consolidation off an intraday diagonal support level, EURUSD has resumed the larger trend with a decline below the 1.11 handle. A fresh USD demand could see a test of the 1.1050-1.1025 support zone. However, the bulls are not out of sight.
The decline from 1.125 continued on Thursday from 1.116 after a brief and small bounce off 1.113. It eventually dropped below 1.11. Today started with the price slightly above 1.11. Euro currently goes for $1.108 - not far from parity. There is no high impact news in the calendar as the week runs out. The price could have a bit of recovery to 1.1130.
EURUSD analysis: important price levels
The two most important levels now are the 1.125 resistance level and the 1.1025 support level. The near-term direction could be determined by the breach of either of these levels. To the upside, if the price stays above 1.1025 and rallies above 1.113, there is a big possibility that the bullish correction from 1.1025 will continue toward the 1.14 handle. On the other side, if the current dip extends below 1.1025, the long term bearish trend could continue below the 1.1 handle.
EURUSD Elliott wave analysis
In our recent EURUSD Elliott wave updates, we expected the long term bearish trend to have ended at 1.1025 with an ending diagonal 5th wave pattern. The surge that followed from 1.1025 to 1.1250 was healthy and further boost the validity of this forecast. The dip from 1.125 was expected to be corrective - a double zigzag confined within a channel and ending at the 1.114-1.111 Fibonacci zone as the chart below shows.
Currently, the decline that followed breached the Fib support zone. However, the wave analysis is not invalid. Wave 2) can correct very deep into wave 1) but must not breach its starting point. The chart below shows the new update.
Most corrective patterns are confined in a triangle, rectangle or channel structure. None of these structures is quite possible if the wave 2) dip is considered corrective. However, the basic rule is not bent until the breach of 1.1025. If a big surge happens above the Fib zone toward 1.115, the bullish run from 1.1025 will have a chance to continue. A dip below 1.1025 will extend the bearish trend.