EUR/USD ABC Pullback In Wave 4 After Bearish Freefall

EUR/USD is building a bullish pullback after a bearish freefall last week – as we expected. Is the downtrend already over or will there be another bearish price swing?

The EUR/USD bearish breakout and strong impulse is typical for a wave 3 (orange) pattern. The current pullback is probably a wave 4 (orange).

A bullish ABC (green) pattern is expected in wave 4 (orange). A bearish bounce (red arrows) is expected at the 38.2% Fibonacci.

Price charts and technical analysis

The EUR/USD bearish breakout and strong impulse is typical for a wave 3 (orange) pattern:

1. The current pullback is probably a wave 4 (orange). It is expected to be a typical wave 4, which is shallow, choppy, and lengthy.
2. Price action has already made a pullback to the 23.6% Fibonacci level.
3. But usually price retraces back (green arrows) to the 38.2% Fibonacci level.
4. A bearish bounce (orange arrows) at the shallow Fib levels confirms a wave 4-5 (orange) pattern.
5. After that, a re-break below the 21 ema zone could confirm the downtrend continuation.
6. A break above the 50% Fib places this Elliott Wave outlook on hold whereas a very deep retracement invalidates it (red circle).

On the 1 hour chart, price action made a decline below the Wizz 7 target, which indicates how impulsive the bearish swing really was:

1. A bullish ABC (green) pattern is expected in wave 4 (orange).
2. A bearish bounce (red arrows) is expected at the 38.2% Fibonacci.
3. A break below the support line (green) could indicate an immediate breakout (dotted red arrow).
4. Sideways price action (orange/green arrows) could indicate a range followed by a bearish breakout.
5. The main targets are located at 1.1750-1.18.