The EUR/USD has been trading lower nicely for the last week or so, which could be start of a new larger impulsive bearish trend. However, decline from 1.3450 is actually still in three waves so corrective outlook must not be ignored, but we will stay with current sentiment and focus on the bearish scenario as long as 1.3400 holds. Ideally market is now in the middle of an impulsive wave 3, and broken support channel line (blue circled zone on 4h chart) is important evidence for this count, because this breakout usually causes an acceleration that makes wave 3 the longest and sharpest wave. Downside projections for wave 3 are at 1.3130 and 1.3040.
EUR/USD 4h Elliott Wave Analysis
On a daily chart, we can see that EUR/USD has been in an uptrend mode almost all summer from 1.2750, but recovery has a corrective look. With that said, we think that move is a complex correction, probably flat, and that the larger trend will continue lower, especially if we consider a five-wave decline from 1.3700 at the start of the year. Keep in mind that impulses show direction of a larger trend, which in our case means down. If we are correct, then the latest bullish leg represents wave C of a three-wave pullback that already is showing some evidences of a top at 1.3450. We still need a larger impulsive weakness toward 1.3000 to confirm the end point of wave 2. If the pair can do that, then EUR/USD will be ready for a sharp fall in the rest of the year, probably to 1.2500 if not lower.
EUR/USD Daily Elliott Wave Analysis
On a weekly chart we are also tracking a huge head and shoulder pattern where right shoulder could already be finished, so weakness is expected towards the neckline.
EUR/USD Weekly Head & Shoulder Pattern