Bottom line:  EURUSD bulls are expected to remain in control until prices stay above 1.0778 mark. The diagonal structure seems to be now complete and a break above 1.1240 confirms.

Technical Analysis:

EURUSD might have carved a meaningful bottom at 1.0778 levels on Friday last week. On the weekly charts, Fibonacci 0.786 retracement of previous rally between 1.0340 and 1.2555, has provided the necessary support. A pin bar appearing on the Weekly Chart and a Morning Star complete on the Daily Chart view are indicating a potential reversal. The EURO bulls now have to complete a 5 wave rally on the smaller time-frame (1 hour) to confirm a potential reversal ahead. Looking at the bigger picture, not seen here completely, EURUSD has dropped from 1.2555 levels in a corrective way. The initial drop between 1.2555 and 1.1300 was an impulse labelled as Wave A. This was followed by a potential barrier triangle labelled as Wave B. The last leg potentially unfolded into an ending diagonal 1, 2, 3, 4 and 5^th wave terminated at 1.0778 levels. This could be Wave C as labelled on the chart view here. If the above larger degree wave counts are correct, EURUSD stands a fair probability of a bullish reversal from here and prices would ideally stay above 1.0778 mark. With the Fibonacci 78.6% retracement also coming around the price action, it adds more significance to the above setup. Also note that the previous rally between 1.0340 and 1.2555 was sub divided into 5 waves, as seen on the weekly chart. So the overall wave structure since 1.0340 lows is that of a 5-3 wave pattern. This should be ideally followed by another 5 waves towards major trend, which is higher in this case. Most traders might be willing to initiate long positions against 1.0778.

Prepared by

Harsh Japee, Technical Analyst.

EURUSD Chart

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