Almost a month ago, on October 29th, EURUSD was trading near 1.0930. On that day we published “EURUSD Might Recover, But How High?”, saying that “we might see a temporary recovery up to 1.1100 soon, but eventually, the bears should prevail.” That is what our primary count was suggesting back then. The chart below shows it.
As visible, we were expecting a corrective recovery, because, according to the Elliott Wave Principle, every impulse is followed by a correction in the opposite direction. The first resistance retracements usually face is at the end of wave four of the prior impulse. So, that is why we assumed EURUSD would be aiming at 1.1100, before the bears return. The next chart shows how things went.
1.11 was never reached, but EURUSD climbed as high as 1.1072. Soon after that, the exchange rate resumed its downtrend. Today, the euro is trading close to 1.06 against the US dollar. Those, who have been following us regularly, know that our longer term target for EURUSD was parity. And it still is. However, is looks like the pair is going to have to make another corrective advance first.
As the above-shown chart depicts, the sell-off from 1.1495 to 1.06 appears to be a five-wave impulse. Wave 5 reminds us of an ending diagonal, which is a reversal pattern. If confirmed, it has the potential to take the rate back up to 1.08, which is where the first resistance lies. In other words, now may not be the best time for new short positions in EURUSD.