People see EURUSD‘s recent plunge as a result of ECB’s decision about interest rates. We at EWM see it as a natural post-triangle thrust in wave 5 down. Many experienced traders have the following motto: “trade against the news”. Well, the news is highly bearish for EURUSD, even in the long term. However, in or opinion, many experienced traders are short-term bullish right now.
As shown on the above chart, the crash from 1.40 to 1.35 forms a five-wave impulse. According to the Elliott Wave Principle, triangles precede the final movement of the sequence. In our case, wave 4 is clearly a triangle, so the post-ECB drop-off fits perfectly into the “last movement” description.
After every impulse, a correction follows. That is why we expect a three-wave rally now. If this is the correct count, EURUSD may reach the area of 1.3750, before the larger downtrend resumes.