No doubt the EUR/USD has been a highlight during yesterday’s trading session as it breached a critical support zone. Today’s analysis will provide an updated review on what to expect from here on.
1.1550 was a crucial support level for the EURUSD, being one of the final major support zone that was established during wave 4 of the 2017 uptrend. This is usually a very important bouncing spot for corrections of a higher degree. However the EURUSD broke and closed with a Daily candle below this support level, thereby opening up the potential for a deeper move.
A pattern, which could have been an ending diagonal and the start of a larger bullish corrections, was invalidated by yesterday’s sell-off. So what are the remaining price paths from this point?
- An extension of the bearish move at this point could turn ugly for the EUR, as it would mean that we are only in the middle of a large wave 3 to the downside, which could drag price down below 1.14 (based on Fibonacci relationships) before we may see a more significant upwards correction. Furthermore, an extended bearish move that goes below 1.14 in one single swing would also begin to cast doubt on the longer-term idea of a EUR/USD uptrend continuation. But this is currently still the least likely scenario of all the ones that are presented in this analysis. (it is not shown on the charts, plus the bullish relief rally (at the time of this writing) suggests otherwise as well)
- A standard impulse might be replacing the ending diagonal, which would now be close to completing its 3rd wave. This scenario would imply another couple of mild lower lows, perhaps testing the 50% Fibonacci retracement at 1.1450, before a much stronger relief rally will kick in. The pullback over recent trading hours suggests that this scenario has good chances of playing out. If we are dealing with an overall zigzag since the Feb high, the purple count and price projection applies.
- If we are dealing with an outright impulse since the feb high, the grey count and price projection would apply. It is less likely than scenario 2 in my opinion
All the best along your trading journey