Broken Channel Support On EURUSD Can Cause Deeper Correction

17 พ.ค. 2023

“USD is turning up vs EUR ahead the US debt-ceiling deadline. EURUSD pair breaking the trendline support“

The USD is higher while stocks are still somehow sideways. The reason for the higher USD can be optimism and speculation about US debt-ceiling. We expected that they will approve it, otherwise, this will cause a lot of damage on the financial market. Yellen has repeatedly warned that »failure by Congress to raise the $31.4 trillion federal debt limit could spark a “constitutional crisis” and would unleash an economic and financial catastrophe for the U.S. and global economies”, as reported by Reuters.

USD is trading higher with US yields, and it appears there can be more USD strength coming when looking at the EURUSD pair.

From Elliott wave perspective, every five-wave impulse from lows/highs suggests a change in the trend, but most importantly, after every five waves there comes a three-wave correction.

EURUSD has been trading higher as expected and reached a new 2023 high, where we still think that pair can have now a “temporary” failure break to the upside, which certainly can be the case as recovery seems to be slow and overlapping up from March 1.0517 low. So, latest leg up EURUSD from 1.0517 low, can be an ending diagonal in wave 5 of a higher degree five-wave bullish, which is also a very strong bullish reversal pattern.

Now that EURUSD is turning down, we can also see the pair trying to break out of an important Elliott wave channel support line after a bearish divergence between highs of wave five and wave 3 which is usaully the case at an important top of an impulse. That said, we think that a higher degree correction can be underway now with next ideal support for the EURUSD this year visible at the former wave (4), 1.05 support area.