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Post-ECB EURUSD Elliott wave analysis and forecast

Sanmi Adeagbo | Apr. 10, 2019
Post-ECB EURUSD Elliott wave analysis and forecast

EURUSD dropped below 1.125 during the ECB meeting. Here are the highlights and EURUSD technical forecast.

April 10, 2019. AtoZ Markets - The European Central Bank said that the euro-zone inflation likely to decline over the coming months after it revealed its stance to keep the interest rates unchanged. The ECB meeting on Wednesday came with highlights and as usual, EURUSD is making some good moves. After staying in a 30-pips range prior to the event, the currency pair has dropped about 50 pips.

The ECB has decided to keep rates unchanged. This means that the interest rates on the main refinancing operations and the interest rates on the main marginal lending facility and the deposit facility will remain at 0.00%, 0.25% and -0.40% throughout 2019 at least. According to the official statement: ''The Governing Council expects the key ECB interest rates to remain at their present levels at least through the end of 2019''. The statement included that this could go even beyond 2019. EURUSD retreated from the rally to 1.129 but the deflection was small until the press conference less than 1 hour after. 

ECB press conference: highlights

1. The ECB president refused to discuss the terms of TLTRO. He said the Council agreed that further analysis is needed. Precise terms of TLTRO will be communicated at the forthcoming meetings.

2. Underlying inflation remains muted. Inflation is likely to decline in the coming months but could be raised by a tighter labour market in the medium-term.

3. Data reflects external demand, country-and sector-specific factors.

4. Financial conditions, labour market, wage growth underpin expansion.

EURUSD tanked below 1.1250 after the inflation report and now heading to 1.12 handle as the market awaits further action during the FOMC meeting coming later today. A dip below 1.1185 support would see this currency pair retest 1.1175 May low.

EURUSD Elliott wave analysis

EURUSD has a big tendency to continue the bearish run. The long term impulse wave from Jan/Feb 2018 is about to complete with a diagonal pattern. A 3-wave bullish correction might follow to 1.18-1.12 but it remains to be seen how price would behave in the coming days. The chart below was used in the last update, to weigh on the last leg of the 5th wave diagonal.

We expected further rallies toward 1.13 before another dip to 1.15-1.16. Price is now heading downside as the chart below shows.

Further dip is expected to 1.116 or 1.115. If price bounces to the upside afterwards, it could be the beginning of a multi-week rally toward 1.18-1.21. However, a fast dip below 1.15 to 1.11 could jeopardise the bullish expectation. 

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