EURUSD rallied to hit 1.15 after Fed's dovish decision drives the greenback down. The following looks at the technical side based on Elliott wave theory.
January 31, 2019 | AtoZ Markets - In its first meeting this year, the FOMC has decided to hold on to the rate figures after the December 2018 hike. This decision quickly drove USD downside and major currencies gained against the greenback. Aside the rate decision, the US-China trade negotiations still remain unsettled while Italy is officially in recession. The German sales also slumped in what might be a look back to the downside for EURUSD depending on how worse the USD slump will be.
EURUSD has moved this year in an ''un-trendy'' manner. It also does not look sideways as there were big swings in-between. This year started with an upswing to 1.1570 from 1.1308 in the first trading week. The next two weeks saw price plummeted from 1.1570 to 1.129. Price picked up last Friday and has gained, hitting 1.15. Primary, price has oscillated between 1.13 and 1.15 important levels. These two levels are very significant as they have both acted as resistance and support levels many times since the second half of 2018. Where is the next breakout going to be?
The first bullish swing to 1.1570 was meant to complete a corrective pattern. Price was therefore expected to drop below 1.13 and 1.1215 support levels to continue the bearish trend that dominated 2018. The dip from 1.157 to 1.1.129 completed the first leg - an impulse wave - of the larger degree bearish impulse wave. The chart below was used in the last update before Wednesday's FOMC meeting.
The rally from 1.129-1.13 was expected to be corrective and up to 1.15. Once the bullish correction ends, price was expected to continue downside below 1.13 and 1.1215 support levels. Unless a break above 1.157 happens, the bears still have a good change of turning things around. The chart below shows what happened after Wednesday's FOMC meeting
EURUSD Elliott Wave Analysis and Important Price Levels
The bullish correction is still viable though the b-wave is very shallow. The bullish move however, is not a very convincing one and price might surge above 1.1570 to invalidate the bearish scenario. But if price forms a reversal head around 1.15-1.1525, a dip below 1.145-1.14 territory would be a good confirmation of this scenario. If price moves this way, we would most likely see a dip below 1.13 and 1.1215 in the coming days and weeks as earlier mentioned.
Please share your thoughts with us in the comment box below