Bottom line:  EURUSD needs to break above 1.1095 resistance to confirm that a bottom has been formed. 1.0810/20 is expected to provide the required support.

Technical Analysis:

EURUSD bears have managed to break below 1.0879, the October 01, 2019 lows. The overall structure needs to be re-labelled as shown here. Let us look into probable wave count since 1.2555 highs (not seen here). EURUSD seems to have completed a larger degree corrective drop A-B-C since 1.2555 highs in February 2018. Wave A had dropped in 5 waves between 1.2555 and 1.1300; Wave B was corrective 3 waves and Wave C can be described as an ending diagonal seen on the chart view here. The recent drop between 1.1240 and 1.0827 could be Wave 5 of the ending diagonal Wave C of the proposed corrective drop A-B-C from 1.2555. If the above count is correct and holds true, EURUSD should find bottom around the current lows (1.0825/30) and reverse higher again. With respect to the price action, immediate resistance is seen through the 1.1095 mark and bulls need to break higher to confirm a bottom. Also note that potential Wave 4 termination within the diagonal is at 1.1240 levels. Bulls should be poised to terminate the first impulse rally above 1.1240 to confirm a reversal. Furthermore, after the thrust drop is complete, the reversal normally takes price back to the beginning of the diagonal structure. It is around the 1.1550 mark in this case, where we can expect prices to terminate after a trend reversal is confirmed. At lower degree, a break above 1.0890 would be required to confirm a trend reversal. Traders might be willing to commit long positions on a dip after breaking above 1.0890 highs. Watch out for price action above 1.0860 to release selling pressure.

Prepared by

Harsh Japee, Technical Analyst.

EURUSD Chart

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