EURUSD Weeks Ahead of the German Coalition Talks

eurusd elliott wave analysis january 1

It has been a wild week for EURUSD. The pair opened at 1.2027 on Monday, but quickly fell by over 100 pips to 1.1916 on Tuesday, only to resume its rally and reach a new three-year high of 1.2134 as of this writing. The last time the pair traded above the 1.2100 mark was in December, 2014.

Our previous article about EURUSD was published on the very first day of 2018, while the pair was already above 1.20, to explain how it got there from an Elliott Wave perspective. In our opinion, an ending diagonal pattern was in progress. What we did not tell, though, was what should follow. That information was included in our premium EURUSD analysis, sent to subscribers on Monday, January 1st.
eurusd elliott wave analysis january 1
Since the ending diagonal scenario was still going as planned, there was no reason to abandon it. As visible, the 4-hour price chart of EURUSD suggested waves “iv” and “v” of (iii) of 5 were going to lift the pair a little bit higher, before a pullback in wave (iv) begins. Only after the bears force the exchange rate to touch the top of wave (i) at 1.1961 could the uptrend resume in wave (v) of 5, because within an ending diagonal, the first and the fourth waves overlap. Here is what happened next.

eurusd elliott wave analysis january 8

The following week was not very entertaining as EURUSD closed almost unchanged on Friday, January 5th. However, it still managed to achieve some progress by completing the five-wave structure of wave “c” of (iii). This, in turn, meant that wave (iv) was already under construction and “a decline to 1.1950 should be expected, before the pair reaches 1.21” in wave (v). Five trading days later, here is an updated EURUSD chart.

eurusd elliott wave analysis january 12

Wave (iv) caused a small selloff to 1.1916 only to give the pattern its traditional contracting shape and give the start of another rally in wave (v), which is already approaching 1.2140. If you listen to the news, the current optimism is the result of today’s announcement that German political parties have agreed on a 28-page paper, allowing them to proceed with the coalition negotiations. The Elliott Wave principle, on the other hand, removes the need to wait for external factors, such as news and events. In EURUSD’s case, the time to turn bullish was weeks ago, not today.

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