EUR/USD is still expanding its bearish pull back within wave 2 unless price manages to break below the support zone and thus creating a new wave pattern.
In this article we will discuss the potential price movements for this week, which are expected to be quite volatile considering the expected Fed Interest rate decision on Wednesday.
EUR/USD is in a critical zone. It will either confirm the end of wave 2 and start of bullish wave 3 start (see image below) or invalidate it and start a potential downtrend.
Which of the two scenarios has the best odds? At this moment I still think that the ABC zigzag pattern is the most likely scenario. The completion of the bearish wave C could indicate the end of such a wave 2 and signal the start of wave 3.
The main conclusion is that the wave structure is still valid as long as price stays above the last bottom at 1.21535. If price remains above support, we are looking for a reversal signal to trade the pair for the upside only.
Now it’s time to use the SWAT charts to pinpoint potential trade setups within the expected wave structure and patterns.
And to cut it short regarding the two expected scenarios, we have the below 4 conditions that I need to see in the chart in order to know the pair next bullish move will start:
Our target will be around -27.2 %, and -61.8% Fibonacci level or traders can use trailing stops.
From my point of view, the bullish breakout could start a wave 3 so I will be aiming for a break of the top.