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Market Updates

17 Sep. 2018

EUR/USD adhered to the bearish corrective flat structure pattern as expected, what next?

Trading proverbs: “All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis." – Jesse Livermore.





The News…


The markets have seen a mixture of bearish and bullish sentiments around the U.S dollar this week. Sentiment towards the greenback turned almost negative early last week after a couple of downbeat U.S. economic indicators namely a slowdown in the pace of inflation and miss in retail sales expectations slimmed down the possibility of a rate hike in December in the United States.


However, the U.S dollar bounced back strongly on Friday against a basket of currencies on news that the U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports, spurring demand for the U.S safe haven status, especially during times of uncertainty.




Last week the EUR blasted up like a rocket to as high as $1.1720 bolstered by softer U.S inflation data and a slightly hawkish comments from ECB president Mario Draghi on last Thursday. However, the Single currency failed to gather extra momentum on Friday’s session and fell back to $1.1630 level on risk aversion.



Technical outlook: EUR/USD adhered to the bearish flat structure pattern as expected, what next?


Here is how we forewarned that spike on the EUR/USD last week:


Posted on Monday, September 10 2018



“On an Elliott wave perspective, the EUR/USD has still ground to unfold into a “Flat structure pattern” which could possibly send the pair higher to revisit $1.1660/1.1720 levels in the coming days.”



However, the bigger picture suggests for further weakness ahead with possible target lower to $1.1467 followed by 1.1350”.






What to expect next?


On the Hourly chart, the EUR/USD may have completed the bearish flat structure pattern in wave (X) highlighted last week. In an Elliott wave perspective, the  current pattern still suggest for further decline in wave (Y) of a zig-zag correction in wave B.


Looking ahead on the EUR/USD, a failure at $1.1573 would signal a bearish bias for an initial test of $1.1517 and possibly “en route to $1.1400/1.1350”. On the upside, a move back to $1.1736 would challenge for further gains near $1.1900.






Read how we anticipated the moves on the EUR/USD: down, up and down over the last two months!!




Disclaimer: This communication is provided for information and discussion purposes only. Unless otherwise indicated, it does not constitute an offer or recommendation to purchase or sell any financial instruments or other products. AfrAsia Bank does not guarantee or warrant the accuracy, reliability, completeness of the information in this publication.