Price action fell below 1.2050 towards the round psychological support at 1.20. There it made a short bullish bounce before breaking earlier today below 1.20.
EUR/USD made a bearish breakout as expected in our Elliott Wave analysis on Tuesday. This article reviews the main targets for the decline.
EUR/USD is building a bearish trend channel. But price action is also approaching the 23.6% Fibonacci level of wave 4. What can be expected from waves and Fibs?
Price Charts and Technical Analysis
The 23.6% should create a small bounce back up (green arrow).
But the bullish reaction is expected to be a shallow pullback within the downtrend (orange arrow).
A strong wave C (pink) should take price action to lower levels.
The main targets for the bearish wave C are the 144 ema zone and the 38.2% Fibonacci retracement level.
A bullish bounce (blue arrow) is eventually expected at the 38.2% (or 50%) Fibonacci level if the wave 4 (purple) analysis is correct.
The wave 4 becomes less likely (yellow button) with a break below the 50% Fib.
The wave 4 is invalidated at the red circle.
The uptrend is back in play after the retracement finishes and we see a bullish breakout above the downtrend channel.
On the 4 hour chart, price action seems to be building 5 waves (grey) within wave C (pink). This seems to fit the ABC zigzag analysis after 5 waves (grey) were completed in wave A (pink).
The current push lower is probably a wave 3 (orange) that could complete at the 23.6% Fib of the daily chart. Then a shallow flag pattern should confirm wave 4 (orange) as long as the pullback remains below the 50% Fib and resistance trend line (orange).
A downtrend continuation is expected to fall towards 1.1915-25. Then even as far as 1.1750-1.18 target zone.
