- Cycle analysis indicates a short-term bias higher

- 1.1850 seen in the crosshairs

- Risk of final drive lower after that, however

Holders of Euros may get a better deal by waiting before exchanging them for US Dollars, according to an Elliot wave analysis of the EUR/USD pair conducted by analysts at the broker LiteForex.

The analysis indicates the possibility of a rise in coming days to a target in the mid 1.18s; although dealers should take care, as waiting too long could risk them losing out altogether: after peaking, the market is expected to fall and end potentially in the 1.13s, says the same chart.

It is also critical to the bullish short-term forecast that the exchange rate remains above 1.1589, says LiteForex. A break below would prematurely signal the start of the next wave down, destined for the 1.14 or 1.13s.

"If the presumption is correct, the pair will continue to rise to the level of 1.1850. The level 1.1589 is critical in this scenario," says LiteForex.

Elliot waves are cycles of buying and selling, of rising and falling prices, which are composed of 5 smaller waves numbered 1-5, or labeled using Roman numerals, as in I, II, III, IV, and V.

Waves 1,3 and 5 move in the direction of the dominant trend whilst 2 and 4 represent corrections.

After a 5-wave pattern has finished the market corrects back in a shallower counter-trend 3-wave move labeled A,B, and C.

LiteForex's wave analysis suggests the current bear trend, which began at the 1.2619 highs, is one such 5-wave Elliot wave, which currently rising in the middle of a wave 4 correction (labeled using the Roman numeral 'IV').

This wave IV will probably rise to a peak at 1.1850 at the dotted trendline drawn by joining the 1.2619 highs with the end of wave II, a common endpoint for wave 4s.

After that, however, wave V will take the exchange rate in its final 5th Elliot wave lower, to a target between 1.14-1.1320.

"Breakout and consolidation below the level of 1.1589 will allow the pair to continue declining to the levels of 1.1439 – 1.1320," says LiteForex.

The bullish forecast to 1.1850 is supported by momentum indicators which highlight the strength of the current recovery rally, as noted by Richard Perry of brokers Hantec in a recent report.

Momentum indicators like RSI and MACD are showing the same readings as in April, says Perry, when EUR/USD was trading between 1.22-24.

This has created a phenomenon known as 'convergence', which is a bullish sign for the pair predicts higher prices.

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