The EUR/USD traded higher last week and reached highs around 1.3400, from which point the pair reversed impulsively and suggests that highs are in. As such, the larger ending diagonal appears complete and is now pointing for weaker EUR/USD. We will look for sizable decline once 1.3180 support is taken out. Why is 1.3180 support important? Because that's a swing low of wave four, and when the floor of wave four is broken, that trend has changed and bearish waves are underway.
What is an Ending Diagonal?
An ending diagonal is a special type of pattern that occurs at times when the preceding move has gone too far too fast, as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes, they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.
- structure is 3-3-3-3-3
- a wedge shape within two converging lines
- wave 4 must trade into a territory of a wave 1
- appears primarily in the fifth wave position, in the C wave position of A-B- C and in double or triple threes as the final "C" wave