After a two-month grind towards lower levels, EUR/USD has shot higher. We were anticipating the bounce during the sell off at a bounce to 1.17 and possibly higher. Now that EUR/USD has continued to rise, it appears poised to retest its 1.2060 highs make a run at 1.22.
The Elliott Wave models we are following suggest a dip in prices may occur first prior to a 1.2060 retest. This dip in EUR/USD may move down to the 1.18 level. From there, the models diverge with some pointing to higher levels and others suggesting a deeper set back to near 1.17.
Through the lens of standard trend lines, EUR/USD is retesting the bottom side of a parallel trend line in place since early 2017. If the market can comfortably move above this level, then the door is open towards new highs.
Struggling to trade EUR/USD? This could be why.
Idealized Elliott Wave Flat Pattern on EUR/USD
Here is the skinny on the Elliott Wave count. The November low represents the fourth wave low of a five wave impulsive sequence. The fifth wave began November 6 and represents a terminal wave at two degrees of trend. That means once this fifth wave exhausts to the upside, it will also exhaust the ‘C’ wave of a large expanded flat pattern that began March 2015. This implies an important top for EUR/USD, but we are not there yet.
EUR/USD Elliott Wave Count November 27
We can use wave relationships to provide targets for a fifth wave higher. These are guidelines and it does not mean EURUSD has to move to these levels. It does keep the door open that higher prices are still available to EURUSD.
There is a cluster of wave relationships showing up near 1.22.
- The 50% retracement of the 2014 downtrend is near 1.2205
- The ‘C’ wave of the flat pattern is 1.618 times the length of the ‘A’ wave near 1.2207.
- Circle wave ‘v’ is .382 times the distance of circle waves ‘i’ through ‘iii’ near 1.2241
With several different wave relationships near 1.22, should EURUSD enter that zone, it could mean an important top.
The sentiment picture continues to support bullish patterns. The current sentiment reading is -2.3 with the net short traders growing. This serves as a bullish sentiment signal. View the live sentiment reading to keep on top of any changes that may occur.
Therefore, so long as EURUSD is above 1.1553, we will maintain a bullish bias towards 1.22. In the short term, EURUSD may dip down to 1.17 or 1.18 and therefore we will look for a buy the dip strategy.
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---Written by Jeremy Wagner, CEWA-M
Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to help break down the patterns according to Elliott Wave theory.
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