EUR/USD Elliott Wave: Temporary new highs

Zorrays Junaid Alchemy Markets

Executive summary

Wave (2) corrective decline continues from 1.1918.
Wave B of (2) may have topped yesterday at 1.1918.
Decline to 1.12 – 1.1391 and possibly lower levels are anticipated.

EUR/USD has rallied to fresh 4-year highs on the heels of the Fed’s 25 basis point rate cut. Yesterday’s high may have printed the end to a corrective rally, leading to a decline in an ongoing wave 2.

Current Elliott Wave analysis

EUR/USD reached its highest level since 2021 yesterday printing 1.1918. It appears EUR/USD was rallying in wave ‘B’ of a larger flat corrective pattern that began on July 1.

An Elliott wave flat pattern subdivides as 3-3-5 and is labelled A-B-C. The first leg, wave A, moved lower reaching 1.1391 on August 1.

Wave B then trended higher as a w-x-y pattern, a double zigzag. It is common for the adjacent waves of a flat, waves A & B, to contain different complexities. In this case, wave A was a simple zigzag while wave B was a double zigzag.

It appears wave B completed at yesterday’s high because within wave B, wave ((y)) was equal to the length of ((w)). This is a common wave relationship. (see blue Fibonacci extension line).

As a result, we are anticipating the beginning of a decline to carry down and retest the previous low at 1.1391.

An early warning signal the decline is in force if EUR/USD breaks below the purple support trend line. If this breaks, then it will build confidence a top is in place and that EUR/USD may trend towards 1.1391. Near this same price is the 23.6% Fibonacci retracement of wave (1), the 2025 uptrend.

If EUR/USD is successful in pushing below 1.1391, the next layer of support is the 38% Fibonacci retracement level near 1.12.

Bottom line

The Elliott wave corrective wave 2 is reaching its final leg lower. The expanded flat pattern began July 1 and we are anticipating 1.12 – 1.1391, and possibly lower levels, in the coming weeks.

If EUR/USD breaks out above 1.1918, then we’ll reconsider the wave count.

Author

Zorrays Junaid

Alchemy Markets

Zorrays Junaid has extensive combined experience in the financial markets as a portfolio manager and trading coach. More recently, he is an Analyst with Alchemy Markets, and has contributed to DailyFX and Elliott Wave Forecast in the past.

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