EURUSD trades with a bearish tone since it completed a five-wave structure. The running correction for the second wave alternates perfectly with the fourth wave’s simplicity, suggesting a top is in place.
Moreover, the EURUSD pair tried twice to break and hold above 1.19. It failed at both attempts, raising questions about a double top in place. Last but not least, we can even argue for a head and shoulders pattern in the current area, albeit the price still needs to consolidate the current levels.
German ZEW Failed to Boost the Euro
Yesterday’s German ZEW, a diffusion index reflecting institutional investors’ sentiment, exceeded expectations. It reached 71.5 versus 57 expected, a move that shows optimism regarding the period ahead.
Since March, it improved continuously, showing the resilience of the German economy and the trust that the recovery is in place. However, the market views it as a lagging indicator. As such, in times of a crisis, the German ZEW is interpreted as second-tier data.
EURUSD Elliott Analysis
The big question for Elliott traders is how to interpret the five-wave structure that ended above 1.19. It could be the c-wave of a flat pattern. But it could also be only the first wave of a larger degree impulsive structure.
However, in both cases, more downside is needed. Therefore, the bearish view remains intact.
To make the most of it, wait for a pullback towards the 1.18 area. Next, sell against the 1.1920 highs. Finally, set the target for 1.15. Why there? 1.1490 represents the 38.2% retracement of the entire impulsive wave.
In both scenarios mentioned earlier, a 38.2% retracement is in the cards. If this is the c-wave of a flat, the EURUSD should retrace much more than that. Also, if this is the second wave of a larger degree five-wave structure, the EURUSD should also retrace more than the 1.15 level.
All in all, a win-win situation for remaining on the short side.
EURUSD Price Forecast