EURUSD recovery stalls below 1.1 as the chart begins to paint bearish technical signals. The following EURUSD Elliott wave analysis looks at what could happen next.
December 05, 2019 | AtoZ Markets – EURUSD had a massive recovery to 1.11 in December after a 120-pips surge. The USD’s weakness came as a result of US entering into another trade conflict with the EU/France and the latest disappointing data. This has, in turn, boosted the most popular currency pair. The US-China trade conflict is still there with other geopolitical issues. Meanwhile, EURUSD bullish run couldn’t stay significantly above the 1.11 critical level. The Euro-dollar pair remains in the territory of the bears. Therefore, there is still a big chance that the long-term bearish trend will continue.
EURUSD rise on weak USD data
The US announced worse than expected economic data on Wednesday. The ADP non-farm employment change and the ISM manufacturing PMI data all came worse than expected. EURUSD quickly surged to 1.1115. However, it didn’t stay there. A quick decline followed to the 1.107 intraday support level. This was as a result of fresh rumours moving around on Wednesday before the start of the New York session. It was reported that US-China phase one deal will go through. This will despite discouraging reports since late last week about concerns that Hong Kong politics is becoming another barrier. The market will now focus on the US employment data on Friday.
ECB forecast: growth might not improve in 2020
Looking at the recent Euro-zone economic data and ECB forecasts, the growth in the zone is slowing down. Brussels has cut down its growth forecast with no improvements expected in 2020. The factors responsible for woes all came at the same time. The three largest economies in the zone are weighed down by major geopolitical crises and instabilities since 2018. UK is leaving with Brexit and Italy is battling with a recession. Germany has been caught at the crossfire of the US-China trade war for being a major exporter of the two countries. China, a major trading partner with Germany, has cut down its imports. The resultant slowdown in export sales in Germany is having a ripple effect on the smaller EU economies.
EURUSD Elliott wave analysis: price hits critical resistance zone
Technically, EURUSD remains in the bearish territory. The long-term Elliott wave analysis shows a bearish impulse wave emerging from 1.255 in February 2018. The current surge might be another bounce that could lead to a lower level below 1.088. The 5th wave is also emerging into an ending diagonal as the daily chart below shows (Charting tools from TradingView)
The current surge is being resisted around 1.1 where we have the confluence of a horizontal and a diagonal resistance points. Unless a quick break above the wave (ii)-(iv) falling trendline happens, EURUSD should continue the bearish run from the current level downwards. In the last update, we expected a minor 3-wave surge. However, the chart below shows the lower time frame of the 3-wave corrective surge from 1.099.
The corrective move from 1.099 has completed a flat pattern at 1.11-1.1115 which is a strong resistance zone. In addition, a ‘head and shoulder’ reversal chart pattern is emerging with a neckline at 1.1070. The current surge might retest 1.11 once more. If it returns downside afterwards and breaks below 1.1070, we will expect EURUSD price to plummet deeper toward 1.075.