EURUSD made a new low last week. The pair fell to as low as 1.0963 on Friday adding to the downtrend it has been trading in since February 2018. The last time the European currency traded this low against the greenback was in May 2017.
The last few months have been characterized by new lows, low volatility and plenty of overlaps in the price structure. All these features plus our analysis of EURUSD’s bigger time-frames made us think about one specific Elliott Wave pattern. Take a look at it below.
Our subscribers received this chart on July 29th, while EURUSD was hovering around 1.1130. The slow and choppy price action led us to the idea that a contracting ending diagonal pattern was most likely under construction.
Within an ending diagonal, every wave takes the shape of a corrective pattern, usually of the zigzags family. In EURUSD’s case, wave 1 was a w-x-y-x-z triple zigzag, while waves 2 and 3 looked more like simple a-b-c zigzags. The problem was waves 4 and 5 were still missing a month ago.
EURUSD Ignores the Noise, Focuses on the Elliott Wave Pattern
So we though that once wave v of “c” completes wave 3, a notable recovery in wave 4 should be expected. Then the bears would need to make a new low near 1.1000 in wave 5 in order to complete the entire diagonal pattern. Over a month later today, we can now see how things played out.
Wave v of “c” of 3 dragged EURUSD down to 1.1027 on August first. Five days later, the pair touched 1.1250 in wave 4 before heading down in wave 5 to 1.0963 so far.
There has been plenty of market-related news during the past month. There were all kinds economic reports from both Europe and the U.S., not to mention the escalation of the trade war and the G-7 meeting.
And while the outcome of all these was entirely unpredictable, EURUSD’s behavior, it turns out, could be predicted with the help of the Elliott Wave principle. The market was forming a pattern and the news coming out at the time was quickly absorbed by that pattern.
What will EURUSD bring next week? That is the subject of discussion in our next premium analysis due out late Sunday!