the EUR/USD built 5 bearish waves as expected. But is it enough to create a full bearish reversal?
This article examines why we expect the uptrend to turn into a strong bearish price swing. Let’s start.
Price Charts and Technical Analysis
The EUR/USD is testing a heavy resistance zone on the daily chart (top). This previous top is expected to create a bearish price swing for a wave C (pink). Besides the strong resistance, there are also chart and Elliott Wave patterns that indicate a reversal:
- The Elliott Wave patterns are indicating the end of the wave B (pink) and the start of the wave C (pink).
- There was also a rising wedge reversal chart pattern that already broke below the support trend lines (dotted green).
- The bearish 5 waves (orange on 1H chart) is probably a wave 1 (orange).
- The current bullish bounce is expected to be a wave 2 (grey).
- The wave 1-2 (grey) outlook remains valid as long as price stays below the previous top. A bullish break invalidates it (red circle).
- A bearish bounce below the top (orange arrows) could start the wave 3 (grey) lower.
- A lengthy sideways correction, however, could indicate a different corrective pattern rather than a bearish reversal.
- A break below the -61.8% Fibonacci target usually indicates and confirms a wave 3 (grey) pattern.
- The main targets are the Fibonacci levels as indicated in the 4 hour chart. The -161.8% Fib target is located at 1.1916. Price action could decline to test the daily bottom around 1.17-1.1750.
On the 1 hour chart, price action seems to have completed 5 bearish waves (orange) in wave 1 (grey):
- The current bullish price action is probably a wave A (orange).
- The sideways correction seems to be a wave B (orange).
- The wave B is getting support from the previous bottoms (green boxes).
- A bullish breakout (green arrows) above the local resistance (orange) could indicate a wave C (orange) in wave 2 (grey).
- A bearish breakout (orange arrows) below the support (green) could indicate a deeper wave B (orange).
- A bearish bounce could confirm the downtrend. Also a break below the bottom confirms the downtrend.
- A break above the top invalidates it (red circle).
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.