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Going into the FOMC rate decision, everyone may be wondering where the EURUSD is headed next.  From a fundamental perspective, we will cover it in depth on DailyFX.com, but it is just as important to consider the technical perspective.  Although the EURUSD is stronger going into the US interest rate decision, the EURUSD correction from 1.4966 is not over.  In fact, it has probably just passed its midpoint in terms of time.  The corrective pattern currently unfolding is either a flat or a triangle.  There are clear short term opportunities either way; bullish and bearish.

This is our favored longer term structure for the EURUSD.  The current correction is wave iv within the 5 wave bull (roman numeral) that began at 1.3261.  This 5 wave advance will eventually complete wave 3 of an even larger 5 wave advance. 

This chart takes a closer look at the 5 wave advance from 1.3261.  In Elliott analysis, there are certain guidelines that help us determine what the highest probability count is and therefore the highest probability move.  One of those guidelines is channeling.  In channeling, you draw a line from the top of wave i to the top of wave iii and then extend that line from the bottom of wave ii.  Wave iv should end near that line.  As you can see, the EURUSD has yet to reach that line which means that we could see further weakness.  Another guideline is that waves ii and iv (the corrective waves) often take about the same amount of time.  Wave ii took 18 days to resolve itself.  We are now just in day 12 of wave iv.  Therefore both Elliott guidelines strongly suggest that the correction from 1.4966 is not yet complete. 

This last chart of the EURUSD zooms in on the correction that is unfolding from 1.4966.  Our preferred count treats the decline from 1.4966 to 1.4526 as wave W in a large complex correction.  Wave W consists of 3 waves (A-B-C) indicating that either a flat or a triangle is unfolding.  In the case of a flat, price is likely to test at least 1.4799 (61.8% Fibo) but possibly even the high at 1.4966 in wave X before wave Y brings the price below 1.4525 and completes the correction.  Continuing with the flat theme, a rally would last until the beginning/middle of this week before price rolls over and declines quickly into the channel line shown on the previous chart.  If a triangle is unfolding, then the EURUSD will fall into a tightening range before thrusting to the upside through 1.4966 (and likely 1.5000).  The pattern should resolve itself by December 18th (when the time of wave iv is equivalent to the time of wave ii).  

If you have any questions about this report, please discuss it with our DailyFX Analysts in the EURUSD and Elliott wave  forums.

Make sure to check the Daily Technicals at DailyFX.com every day for updates to the EURUSD pattern (as well as the other USD crosses) and the strategy best suited to take advantage of that pattern.   

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