The EURUSD exchange rate reduced to 1.1175 on Tuesday. The following looks at what could happen next based on the Elliott wave theory.
August 14, 2019 | AtoZ Markets – The Euro-dollar was at the verge of testing the 1.1250 resistance level on Tuesday before it quickly dropped to 1.1175. The forex pair dropped as the USD gained some momentum to the upside. The stock markets also rose sharply with the tech companies leading the way. Why the big USD rally?
USD surged after the US President Trump delayed tariffs on some Chinese imports because of concerns over the Christmas shopping season. The US government which slapped 10% tariffs on $250 billion worth of Chinese imports announced in early August that an additional 10% tariffs will be imposed on the remaining $250 billion goods. The tariff which was scheduled to take effect from September 1 is now delayed until December 15.
Whatever the tariffs imposed on Chinese imports, the businesses in question might turn this effect on the American buyers. However, the US government are bent on making Chinese products more expensive and thus less appealing to Americans. China is taking its own steps to counter these moves, first by cancelling all purchases of U.S agricultural products and then the recent devaluation of the Yuan. The WAR is still intense!
Meanwhile, EURUSD has started today with a bullish move to 1.1185 but this might not be sustained. Further dip to the 1.114-1.111 Fibonacci support zone is very much likely. However, the immediate trend remains to the upside.
EURUSD Elliott wave analysis
From the Elliott wave outlook, EURUSD has already started the bullish correction of the bearish trend that lasted between January 2018 and September 2019. In the last update, the chart below was used to analyze the current corrective dip.
Wave b (circled) went more complex hitting above 1.12 twice before finally dropping. The new chart below shows a more complex wave 2) developing.
A double zigzag pattern is emerging. The dip from 1.125 is very much corrective thus increasing the bull’s chance of taking this pair to higher prices toward 1.14 and above. The reversal zone in this degree remains at the 50-61.8% Fib-retracement of the rally from 1.1025 to 1.125. Unless a massive dip happens below 1.1025, the immediate trend remains bullish.