Euro ripe for correction: Elliott Wave

The euro turned bearish against the U.S. dollar (FOREX:EURUSD) at the start of January from a 1.3900 spike high, which we assume represents the final part of a bullish trend. From there, the market fell sharply lower almost 400 pips, so the pair has completed an ending diagonal. However, a key for a breakdown would be move through the red wave 4) swing low that is placed around the 1.3300 figure, still far away from current levels.

EUR/USD Daily Elliott Wave Analysis

EUR/USD four-hour

As expected, the EUR/USD has turned down from above 1.3700 area where we labeled the end of an expanded flat formation that now shows signs of completion after a sharp fall down to 1.3530. The current decline is showing signs of an impulsive pattern, so we suspect that the EUR/USD is heading south. Trend is down as long as 1.3683 remains in place.

EUR/USD four-hour Elliott Wave Analysis

Elliott Wave Education: Flat Pattern

A Flat is a three-wave pattern labeled A-B-C that generally moves sideways. It is corrective, counter-trend and is a very common Elliott Wave pattern.

Expanded Flat

  • Structure is 3-3-5
  • Wave B moves beyond the start of wave A
  • Wave C ends more substantially beyond the ending level of wave A
  • Appears in wave two or four in an impulse, wave B in an A-B-C, wave X in a double or triple zig-zag, or wave Y in a triple threes
About the Author

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/

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