EURUSD retesting 1.17- will there be a bullish breakout?

EURUSD retesting 1.17 for the third time this week after it dropped from the same level last week. Ahead of ECB Draghi’s speech and ongoing US-China trade war, will price break significantly above 1.17?

Dollar has been on the decline since last week as the US-China trade war continues. China has decided to retaliate U.S moves on tariffs thereby leading to a negative market sentiment. EURUSD dropped below 1.17 yesterday but has picked up again in early London session today. The ECB president will also be speaking today on the future of the economic policy of the Euro-zone in Berlin. This will be the second time he’ll speak this week. Market sentiments can be driven by his speech as traders try to decipher clues on the interest rate.

In the last update, we expected price to continue upside above 1.1735 as we projected the second leg of the bullish correction aiming 1.2. The chart below was used in the last update.

The correction might have ended at 1.153 with a double low, just above the 50% Fib-retracement level. A break above 1.1735 should be enough to confirm the continuation of the large degree bullish correction. If this happens, price should head toward the 1.2 handle. On the other hand, if price is once again resisted at 1.1735, the next price below is 1.153. A break below 1.153 will set price between 1.135 and 1.145. 

The wave count used in the last update is still valid despite price’s reluctance to break upside. From another technical perspective, EURUSD is completing an inverted head and shoulder pattern as the chart below shows.

EURUSD retesting 1.17: Inverted head and shoulder pattern?

The chart above shows an inverted head and shoulder pattern after the year long bearish impulse wave completed at 1.13. A break above 1.17 to 1.174 should be enough to confirm price commitment to the upside. The next bullish target would be 1.2 to complete the bullish correction that follows the bearish impulse wave. On the other hand, if price rejects the neckline strongly again without a significant breakout, we might see a drop to 1.145. Technical market sentiments lean towards the upside and if the fundamentals align, causing a bullish breakout, we will likely see EURUSD hit 1.2 in the coming days. Stay tuned for the next update.

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