The Existing Downward Trend Would Lead To A Break Out Below 1.1510

The pair tested firmly the break out below the trend line (in light blue) and in the moment it is trading in a consolidation between the trend line, which has become a support and the dynamic  support above 1.1570.

If we examine the D1 time frame we could say with certainty that the trend is firmly bearish. Now we have to see whether there will be a breakout below the support at 1.1570 until the end of today’s American session or the pair will close the D1 bar once again below the diagonal support as well as the kind of bar it will form when it closes.

In my opinion, in case the pair does not manage to break out below 1.1570 the bar may be a doji or a spinning top, after which the pair will test 1.1510 and if it breaks out below that level it will head for 1.1300.

The alternative scenario is for a rally to 1.1700 and 1.1750.

We Should Expect An End Of The EUR/USD Consolidation And A Breakout Below 1.1510

I think that at this stage we should give up on the idea for a rally to 1.1800 – 1.1850, let alone toward 1.2000.

The pair has been forming a sideways consolidation for two and a half months. The fact that that there was a breakout below the symmetrical triangle that I drew in a previous post  as well as the fact that the consolidation that lasted for ten weeks did not remain above 1.1710 for long should point us to the expectation for an end to that consolidation and a continuation of the downward trend.

I think that every rally should now be viewed as corrective, as gathering of liquidity and an attempt for a drop below the local low at 1.1507, which should open the way to 1.1350 –  1.1300.

I Expect A Breakout To The Upside And An EUR/USD Rally To 1.20+

I expect the consolidation to end soon and for the pair to finally pick a direction.

A clear symmetrical triangle with a height at its base of 325 pips - from 1.1851 to 1.1507 - is forming on the H4 time frame.

The breakout of that triangle is impending and if it is above the resistance trend line then we can expect a rally to 1.20+.

The alternative scenario is for a breakout to the downside, below the support trend line, after which I think there will be a depreciation toward 1.1300 – 1.1280.

I think that the more probable scenario is for a rally toward 1.20+, after which we should be looking for an entry for medium term short positions.

The EUR Continues Developing In A Relatively Tight Consolidation

It’s becoming clearer and clearer that EUR/USD is forming a sideways correction within a rather vague trend channel which can hardly be called anything – it’s neither a flag, nor a pennant. To characterize it as a flag the pair should rally to 1.1850 – 1.1870, i.e. to the resistance trend line of the channel, but so far that has not happened.

Today the ECB announced its interest rate and there were no changes, but the press-conference of its Governor Mario Draghi gave traders good opportunity to begin selling the EUR massively, and the pair dropped from 1.1740 to 1.1650.

Still, until there is a breakout below the support trend line, we could expect a rally. I doubt that the pair will rally much more though. In my opinion, if it reaches the resistance trend line short positions should be in order, and in case there’s a breakout below the support trend line the depreciation could reach 1.1350 – 1.1300.

EUR/USD Renewed Its Depreciation And It May Test The Local Support In The Zone Around 1.1540 - 1.1510

The pin bar on the daily time frame proved to be a false signal and the trend channel seems to be nothing more than a flag that the pair broke out below. Rather than the expected rally the pair fell sharply, broke out below the support trend line and if it breaks out below  1.1570 it may test the local support in the zone around 1.1540 - 1.1510.

It is still difficult to say how the pair will behave once it reaches that zone. The depreciation could be part of a corrective flag and it could begin moving north while forming said potential flag, but on the other hand the depreciation may continue as the USD is clearly very strong at the moment compared to all currencies.

That is why it is prudent to close one’s position at that support and then to wait for a new trustworthy signal to open new ones.

I Expect An EUR/USD Rally To 1.1850

The pair dropped from 1.17905 (9^th July 2018) to 1.16126 (13^th July 2018) within the frame of the wave B of the correction>>>

At the end of the trading session on Friday two things became noticeable:

First of all, the pair rebounded from the support at 1.16126, there by marking a new upward trend channel without a doubt.

Second, when the trading session closed, the pair had formed a clear pin bar on the D1 time frame.

Those two unambiguous signals make me think that EUR/USD will continue rallying first toward 1.1750 and then toward the resistance trend line around 1.1850.

I think the move upward will continue as a correction, but prognoses about that will be possible once the pair reaches its target this week.

The Expectation For A Continuation Of The EUR/USD Move North Remains Valid

The Bank of Canada will soon announce its interest rate and from now the expectation is for a rate hike from 1.25% to 1.50%.

If that should really happen, the CAD will, without a doubt, rally sharply, but that will ricochet on its American counterpart, which should drop, which in turn will affect the EUR/USD pair.

EUR/USD is developing within a strong support zone and if my supposition is correct the move north of the EUR should be renewed. My expectation that EUR/USD will reach 1.1900+ within the A-B-C correction remains completely valid.

The alternate scenario is for a depreciation to 1.1640 so it could gather liquidity and then the pair will continue moving north within that zone.

EUR/USD May Have Begun Developing The B Wave Of The Correction

In my opinion, the double bottom at 1.1500 marked the end of the A wave of the depreciation that corrected the impulse rally from 1.0340 to 1.25556 and the pair may be beginning wave B.

I expect the pair will rally at least to 1.20+ or a little higher than that. Those who know the Elliott Wave theory are aware that the B wave of the correction is the most “capricious” and the hardest to trade. I’ve marked its expected development on the screenshot.

After the end of the wave B there should be a wave C, which is usually an impulse formation consisting of five subwaves developing in an opposite direction of the main trend and it is pleasant to trade.

The C wave may return the pair to 61.8% Fibo of the rally or a little lower than that.

The good news is that the Elliott wave theory is certain about one thing – formations of five waves don’t develop on their own. So once the A-B-C correction is over we can expect a new impulse rally, which will be both easy and profitable to trade, especially for those who keep long term positions.

Will EUR/USD Really Form A Double Bottom?

Last week was rich in important financial news coming from both the USA and the EU and the pair managed to form a pattern that for the moment hints at the presence of a double bottom.

It has reached 1.15097 on 29^th May 2018 and 1.15429 on the 15^th June 2018.

I have already mentioned that I expect the beginning of the second wave of the correction after the impulse rally from 1.03400 (3^rd January 2017) to 1.25556 (16^th February 2018). For the moment the pair has reached a zone where it could find support and the bars on the H1 and D1 time frames are hinting that said zone could really be a strong support and the double bottom will become a reality. If that is a correct scenario then we could expect a corrective long term move north to form said second wave.

In the alternate scenario there could be a corrective move north from the current level to 1.1680 – 1.1800 and then a new depreciation to 50% and 61.8% Fibo of the impulse and only then there could be a major corrective rally.

In the third scenario the pair will continue depreciating to 50% and 61.8% Fibo of the impulse, then it would begin the correction.