EURUSD dropped deep below 1.1 but still a good distance away from major support level. The following is based on the Elliott wave theory.
September 17, 2019 | AtoZ Markets – This week has continued bearish for EURUSD currency pair. It dropped deep below 1.1 on Monday albeit slightly, before returning slightly above it. The road for the Euro-dollar is not yet clear as the bears still look for opportunities to drag the pair to lower prices. Meanwhile, the 1.092 remains intact and unless breached downside, the bulls could hope to mount a big challenge when there is an opportunity.
The geopolitical tension on the Eurozone has increased after last week ECB policy decisions. The ECB decided to devalue the Euro by quantitative easing while also cutting the deposit facility rate. This move unsettled Washington and President Trump responded with some tough tweets to show his discontentments. The markets now see a US-EU tariffs threat looming in the midst of the ongoing US-China tariffs war. Can the US afford two economic foes as strong as China and the EU? That remains to be seen. This uncertainty has probably kept EURUSD from advancing further.
The market will look for more clues from the FOMC tomorrow. Washington has called for its own version of the rate cut and that is what the market expects. Will the Fed surprise us? EURUSD is expected to be moderately traded until after the FOMC on Wednesday as traders and investors remain cautious.
EURUSD analysis: important price levels
The major price levels have not changed from what we had at the beginning of the week.
Resistance Levels: 1.1111, 1.1165, 1.1250 and 1.141 are the next important price levels above the current price.
Support Levels: 1.092. This remains the ‘make or break’ level for the bulls.
EURUSD Elliott wave analysis
From the long term perspective, EURUSD completed the bearish impulse wave that started in January 2018. The pattern ended with an ending diagonal at 1.092. A 3-wave bullish correction toward 1.18-1.21 is expected. However, the attempts to make a massive breakout has somewhat been truncated by the negativities surrounding the Euro-zone economy. In the last update, we looked at the current recovery from 1.092 and how the bullish correction could emerge with the chart below.
The wave 2 (circled) dip went deeper to the 61.8% Fibonacci retracement level below 1.1. However, this forecast is still valid as the new chart below shows.
Traders should be cautious of this currency pair until after the FOMC. If the price breaks above 1.1109, there should be no much barrier on its way to 1.14. If it stays within 1.11 and 1.092 for a much longer time, a bearish break below 1.092 will be more favoured.