Image © Andrey Popov, Adobe Stock

- Exchange rate could be seeing B-wave of bullish structure

- Wave-C could take the pair to as high as the 1.20s

- But - after peaking market may move substantially lower to 1.07 in medium-term

According to the latest Elliot wave analysis of the Euro-Dollar exchange rate, the next short-to-medium term target is located at 1.2050.

EUR/USD has finished a five-wave Elliot wave lower which started at the 1.25 February highs and ended at the August 15 lows.

Once a 5-wave down-move has finished it is always followed by a correction higher, which is composed of at least three waves.

The current move, which began after the August 15 lows, is one such correction, according to Alex Geuta, an analyst at broker Liteforex.

Corrections in Elliot wave analysis are normally composed of three waves labelled A, B and C, which most often unfold in a classic zig-zag wave structure higher.

The recovery since the August 15 lows is probably only the first wave-A of such a three wave structure, says Geuta.

Wave-A has probably now ended and the current move down could be wave-B. B will be followed by 'C' higher, however, which when it finishes could see the pair peak at around the 1.2050 target.

It is possible, however, that EUR/USD will not get that high.

There are many different types of corrections and not all are of the same length; also the forecasting of them is often a very hit-and-miss affair.

Another common type, for example, is called a 'flat' which is usually shallower than a zig-zag; if the current move is a flat the market may not reach the 1.2050 target.

Once the current ABC correction is complete, the market will probably unfold in a broader 5-wave move lower in the medium-to-long term.

Such a move might reach as low as the 1.07s, according to Geuta, although after that the market will probably rebound strongly in a longer-term wave three higher, which is likely to take it well above the 1.25 February highs and into the 1.30s in the much longer-term.

Wave 3s are the strongest waves according to Elliot wave analysis so this would represent a major market reversal for the pair.

Advertisement

Get up to 5% more foreign exchange for international payments by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here