Tomorrow is the EU summit. Ahead of the event, EURUSD recoveries continue higher after it pierced above 1.1 last week. The following analysis includes technical overview based on the Elliott wave theory.
October 16, 2019 | AtoZ Markets – The EU and UK have been on the negotiation table ahead of the October 31 Brexit deadline. Meanwhile, EUR has been upbeat since the start of this month. The most-traded currency pair rallied from 1.088 to 1.1060 and thus recorded 1.66% surge. However, this seems not to be enough at least for now. On Tuesday, the price hit 1.099 before returning to test the 1.106 intraday top. Meanwhile, the downbeat Brexit report coming from the UK this morning is making a break above 1.106 difficult. Will there be a breakdown?
Brexit negotiation continues
The chief among the issues the EU will discuss tomorrow is the Brexit. Negotiators from both parties started talks on Monday. While there have been a lot of optimism that a deal will happen, there have also been downbeat concerns lately. Talks are expected to continue today before the EU summit where a final decision will be made. GBP will continue to be very volatile as the market reacts to headlines.
Aside from the EU-UK talks, the US retail sales data will be released later today. EURUSD’s rally from 1.088 looks corrective. If 1.106 successfully holds as a resistance level, a breach below 1.1 could follow. Below 1.1, the two most significant intraday support levels are 1.094 and 1.088. On the other hand, if the bullish correction continues higher, the price will test the 1.11 handle. 1.125 and 1.141 are the next significant resistance levels if the surge leads to a big breakout.
EURUSD Elliott wave analysis
The long-term bearish trend remains intact. The fact that the rally from 1.088 looks corrective suggests that the bearish trend will resume at some point. In the last update, we identified a double zigzag reversal pattern with the chart below.
EURUSD H1 Chart (Trading View)
We identified a reversal zone around 1.106. EURUSD recoveries continue higher and hit 1.106 as we expected. However, there has not been any reversal signals yet.
EURUSD 30 Mins Chart (Trading View)
The new chart above shows the EURUSD Elliott wave analysis. The price is making a corrective structure from 1.088 within a rising channel. A double zigzag pattern completed at 1.106. However, the dip that followed couldn’t break below the channel for confirmation. If the price breaks below 1.099 from the current position, the double zigzag will be preferred. On the other hand, one more leg could happen to prices around 1.11 handle. A triple zigzag is more preferred because of the corrective structure of the dip from 1.106 to 1.099.