EURUSD had dropped lower towards 1.2051 mark from 1.2181 highs over the last week, before finding support. The currency pair has retraced through 1.2151 levels today and might be preparing to turn lower again. Bears would be targeting below 1.1986 levels in the short term.
EURUSD had earlier dropped from 1.2350 highs through 1.1704 lows, sub dividing into 5 waves, labelled as Wave (1) on the daily chart here. The subsequent rally looks to be corrective between 1.1704 and 1.2181 levels respectively.
The potential corrective wave has been labelled as Wave (2). If the above is correct, EURUSD might reverse lower towards potential Wave (3), exceeding below 1.1704 levels. We need to see a break below 1.1986 levels to get confirmation through.
Also note that Wave (2) had travelled up to fibonacci 0.618 levels (just above that), which is a common guideline for termination. Furthermore, it has unfolded as a-b-c pattern which indicates correction. If wave c is complete at 1.2181, EURUSD is looking poised for a dramatic reversal.
Alternately, if Wave c is still progressing, bulls might extend rally past 1.2181 levels and push through 1.2250 and 1.2300 zone. A consistent break above 1.2220 levels would threaten 1.2350 levels going further.
For now, EURUSD is looking to break below 1.1986 lows in the near term. Potential remains for an engulfing bearish or an evening star candlestick pattern to unfold on the daily chart. Traders might be inclined to remain short until 1.2350 stays intact.
Finacademy Technical Team
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