the EUR/USD is building a bullish pullback after a bearish freefall last week – as we expected. Is the downtrend already over or will there be another bearish price swing?
To answer this question, the article analyses the Elliott Wave and Fibonacci patterns.
Price Charts and Technical Analysis
The EUR/USD bearish breakout and strong impulse is typical for a wave 3 (orange) pattern:
- The current pullback is probably a wave 4 (orange). It is expected to be a typical wave 4, which is shallow, choppy, and lengthy.
- Price action has already made a pullback to the 23.6% Fibonacci level.
- But usually price retraces back (green arrows) to the 38.2% Fibonacci level.
- A bearish bounce (orange arrows) at the shallow Fib levels confirms a wave 4-5 (orange) pattern.
- After that, a re-break below the 21 ema zone could confirm the downtrend continuation.
- A break above the 50% Fib places this Elliott Wave outlook on hold whereas a very deep retracement invalidates it (red circle).
On the 1 hour chart, price action made a decline below the Wizz 7 target, which indicates how impulsive the bearish swing really was:
- A bullish ABC (green) pattern is expected in wave 4 (orange).
- A bearish bounce (red arrows) is expected at the 38.2% Fibonacci.
- A break below the support line (green) could indicate an immediate breakout (dotted red arrow).
- Sideways price action (orange/green arrows) could indicate a range followed by a bearish breakout.
- The main targets are located at 1.1750-1.18.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter.