EURUSD is retreating from 1.116 after a massive surge at the end of the last trading week. The following technical analysis is based on the Elliott wave theory.
August 26, 2019 | AtoZ Markets – Hours before the last trading week ended, EURUSD spiked to 1.116. Prior to the surge, the price was just a swing away from breaching the 1.1025 low. The trade war has intensified and it’s hitting the market so hard. The Euro is massively weak. The German and Italian economies still have recessionary battles to fight while the direction of the Brexit is still unclear. The only thing preventing an unrelenting fall of the EURUSD is the US-China trade war that has held the USD down.
The Jackson Hole event on Friday was overshadowed by the US-China trade war. Beijing has come with its own tariffs to countermeasure the US planned tariffs in September and December. Meanwhile, President Trumps didn’t take this lightly. He has called on US companies to leave China and announced new tariffs and additional levies in a series of furious tweets. There were rumors last week that there would a call for new negotiations but with the latest developments, the war seems to be getting hotter. This war is far from over!
EURUSD analysis: important price levels
Meanwhile, after an over 100 pips rally to 1.1165 on Friday, EURUSD is currently retreating back to prices above 1.11. There is a minor intraday support zone at 1.1105-1.1115. EURUSD currently trades at this zone. To the downside, unless a break below the 1.1025-1.105 happens, the bulls might build on the big surge and break above 1.1165. To the upside, if the price breaks above 1.125, we should see moves toward 1.18-1.2 important price zone.
EURUSD Elliott wave analysis
EURUSD completed the bearish impulse wave that started on January 2018. The pattern ended at 1.1025. We expected a 3-wave bullish correction toward 1.18-1.2 on the long term. However, the bearishness of the Euro is slowing down the move. The rally from 1.1025 to 1.125 completed the first bullish breakaway with an impulse wave. The dip that followed went very deep and hit the 1.1025-1.105 zone as the chart below, used in the last update, shows.
Wave 2) was ending with a double zigzag. We expected a surge above 1.115 to continue the bullish correction to the 1.14 handle. The new chart below shows this forecast is still valid.
Wave 2) will be better called a triple zigzag correction. What is important now is that price surged above 1.115. With the current retreat, we will expect a wave 3) or an alternative wave B) impulse wave. However, this will be confirmed if the bull return to break above 1.1165 and the blue trendline.