The bulls have taken over the Euro in the second half of this month after price completed an important wave pattern. Has Euro truly entered the bullish zone? How high will it fly before the bears take over? The analysis below looks at the short and long term outlook with Elliott wave theory.
This year has seen a fast bearish run of EURUSD as the dollar gained massively against other currencies including the Euro. The price drop was forming a pattern that was so clear – an impulse wave. Impulse waves are easy to spot for users of technical analysis and Elliott wave theory.
Throughout June and July, price was confined in a sideways corrective pattern – a triangle pattern. Triangles are known to often precede the last swing that ends a trend or correction.Thus, they show up in the wave 4 of an impulse wave most often. The June-July triangle pattern was the 4th wave of the year-long bearish impulse wave. At the end of the triangle pattern at 1.175, it was not surprising that price dropped more than 400 Pips from the 1st day of this month to the 15th day to mark a very bearish half of the month.
The second half of the month, however, has seen the bears relinquished their year-long dominance. This was no surprise at all. The drop from 1.175 completed an impulsive 5th wave of the year-long bearish impulse wave.
Price has now traveled upside toward the 1.175 4th wave triangle terminus. The chart below shows all these in just one picture.
The bearish impulse wave completed at 1.13 and price has broken above a major bearish trendline, pointing upside. The rally should continue above 1.2. According to Elliott wave theory, a 3-wave corrective in the opposite direction follows an impulse wave. How far has wave A gone? The chart below looks at sub-wave of wave A.
Wave A is emerging into an impulse wave. Price is in the process of completing the 5th sub-wave of A. Wave (v) of A will be expected to be an impulse wave or an ending diagonal. Once this completes, price would be expected to break below the rising channel and drop back to 1.15-1.16 before the bullish journey completes. Stay tuned for an update tomorrow.
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