appears an A-B-C zigzag correction that began on February 16, 2018 ended October 1, 2019. Therefore DXY may be in the beginning stages of a longer-term downtrend. If there is any strength left in DXY, that strength is likely contained below 99.23 (the October 1 high).
The initial targets to the downside include 94 with much lower levels into the mid to lower 80’s possible.
GBP/USD REACHES AN INTERESTING INTERSECTION OF KEY LEVELS
The subsequent rally has carved in bullish impulsive five waves providing further evidence of eventual higher highs.
Some interesting levels loom nearby. First, the trend line connecting the ends of wave 2 and 4 pass nearby. The 2007 to 2019 pattern is an Elliott wave ending diagonal pattern and a break higher may confirm the diagonal is indeed over.
Additionally, on a weekly chart and applying the Ichimoku cloud (not shown), the lagging line breaks above the topside of the cloud near 1.34. When the lagging line breaks the cloud’s extreme, that can often signal a trend change is underfoot.
Bottom line, higher levels are likely still in store for GBPUSD. If Cable respects the black trend line and falls, a retracement back to 1.24-1.26 would be considered normal and could lead to a punch higher above 1.32.
Even if wave 5 of the ending diagonal pattern morphs into a double zigzag, we will likely need to see higher prices in Cable first before a new low below 1.19.
If Cable continues to scream higher from current levels, then an extended bullish wave three is already underway.
EUR/USD TECHNICAL ANALYSIS: BOTTOM LOOMING NEARBY
The EUR/USD price chart supports the overall weaker US Dollar outlook presented above for DXY and GBP/USD. On October 1, we issued a EUR/USD forecast for an eventual trade up to 1.18 and possibly higher levels. So far, this forecast is on schedule.
A couple weeks ago, I though EUR/USD finished its wave (2) and published a shorter term forecast that EURUSD may move to 1.15 in the near term. It turns out that outlook was premature as it was wave ‘a’ of (2). Now that waves a-b-c appear in place, EURUSD may accelerate higher in wave (3).
Under the near-term bullish forecast, 1.0981 would hold prices above. Even if this level were to break (and its not expected), 1.0880 is a key bullish level that likely holds prices for the next bullish wave up to 1.18.
—Written by Jeremy Wagner, CEWA-M
Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.
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