EURUSD Elliott wave analysis: price in a bullish correction around 1.13

EURUSD is turning upside after completing a reversal pattern just above 1.1215. How far will it go upside? The following give insights based on Elliott wave theory.

February 19, 2019 | AtoZ Markets – The Euro has turned bearish again after recessions hit Italy and Germany – two of the largest EU economies. Amid fears of trade tariff war between US and China, investors are dropping their hold on the Dollar. During the trade war, the USD was held as a ‘safe haven’ for investors which led to gains for the common currency in most part of last year. After such a good performance in 2018, the Fed decided to hike rates in December 2018 with further hikes expected to come in 2019. The Fed ‘U-turn’ and dovish tone toward the rate hike in 2019 saw the market priced in when the Fed announced no-rate-hike in January. The US-China trade talk is getting back on the table after a 100 days truce between the two giants. Investors are unsure of the outcome and this has seen USD drop this month.

Meanwhile, EURUSD is turning upside again, rising above 1.13 after completing a bearish impulse wave from 1.1515 on 31st January to 1.1235 last week. At the latter end of last week, price found its way above 1.13 and continued to 1.1335 on Monday (yesterday) before closing around 1.13 on the same day. Today however, price started with a dip below 1.14 in a minor correction and later spiked upside above 1.13. 1.15 and 1.13 are major price levels which have stood as support or resistance levels many times in the last six months. It seems the current run will continue to 1.14 before the bearish trend continues.

EURUSD Elliott wave analysis and important price levels

In the last couple of weeks, we have identified a bearish impulse wave from 1.1515 and expected this price wave pattern to complete around 1.13 or 1.1215. Price chose to drop below 1.13 but has now bounced upside at some point close to 1.1215. It seems a 3-wave rally is in the cards. The chart below was used in the last update to follow the bearish wave pattern.

The chart above had two scenarios. It considered the 5th wave albeit shorter than expected, to have completed at 1.1215. A 3-wave correction didn’t happen and price didn’t drop to 1.1215 but completed a familiar pattern below 1.1250 instead. The chart below shows how the 5th wave ended.

At the 5th wave, price completed an ending diagonal pattern last week before the rally to 1.13. It seems the bearish impulse wave from 1.1515 has completed and a 3-wave correction to 1.14 is highly possible. The trend is bearish and might continue bar any surprises from the FOMC tomorrow, but the current intraday sentiment points to 1.14.

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