Technical Analysis
EUR/USD Exchange Rate Forecast — Elliott Wave and Fibonacci Price Update
Introduction:
The EUR/USD exchange rate holds paramount significance for international investors in both real estate and capital markets, acting as a pivotal factor in shaping investment strategies and risk management. In this technical analysis, we explore the intricacies of the foreign exchange market, employing Elliott Wave Theory and Fibonacci techniques to forecast future exchange rates and guide investors through the evolving landscape.
Long-Term Perspective:
EUR/USD — 1week Chart
Analyzing the multi-year perspective on a weekly chart, it is believed that the EUR/USD exchange rate reached a cyclical low at 1.0462 in March 2015 after a prolonged Double Zig Zag correction from the supercycle top at 1.6038 in 2008. Since then, the exchange rate has undertaken what is considered an expanding ABC Flat counter-move to the upside, culminating in a new low at 0.9535 in September 2022. The formation is expected to be confirmed upon triggering the $1.25557 level to the upside, completing a higher level Wave B with initial rate targets in the Pink target level box. For perspective, anticipate this blue Wave (c) extension to reach its maximum around the end of May 2027. Note that this Wave (c) move will not unfold in a single straight advancement but in a fluctuating and oscillating subordinated five-wave impulsive structure.
Fundamental Implications:
A potential future weakening of the USD could mirror past exchange rate behavior, where U.S. politics aimed to continuously devalue the dollar to attract foreign investments, supporting the funding of expanding budget deficits.
Short-Term Analysis:
EUR/USD — 4h Chart
Zooming into the immediate perspective on a 4-hour chart reveals the first sign of the implied long-term upside movement in an impulsive five-wave count upwards from the September 2022 lows. This initial impetus was followed by an extended (a)(b)(c) Flat correction, laying the groundwork for an anticipated blue Wave (I)-(II) setup to initiate a new impulsive price move upwards. For this primary scenario forecast to remain valid, observe that prices stay above the red trigger line at 1.07245. Since the last update on March 14, the EUR/USD has struggled to sustain its projected upward trend in a single move towards the 1.1032 trigger mark. Instead, the price action has leaned towards dollar strength, leading to a retest of the critical red 1.0724 downside trigger line. Interestingly, this retest also coincided with the 0.88% Fibonacci Retracement resistance for the current corrective leg down ((w)(x)(y)), marking the beginning of another smaller impulsive move up that began on April 2. This impulse is still ongoing, and I anticipate continued strength in the EUR in the coming days, maintaining the primary EUR bullish count and sub counts intact. Only if this impulse ends prematurely and the exchange rate drops below the 1.0722 trigger level, would we find ourselves in a prolonged blue wave II retracement, with cycle lows being one resistance step lower and pushed further into the future.
Investment Considerations:
With limited upside potential for the USD in the coming weeks and months, this winter season could be an opportune time for those contemplating divesting from their U.S. real estate holdings. Such individuals may consider strategies to exchange their proceeds back into EUR currency for the time being.
Alternative Scenario:
Please note a 30% probability of an alternate scenario if the exchange rate closes on a weekly candle below the $1.07245 red trigger level, invalidating the primary forecast above. In this case, the ABC Flat correction would not be concluded, and a continued ABCDE sideways correction would be expected to play out through mid-year. In such an event, new price targets would be communicated, possibly surpassing the previous low point.
Wave Table
Pivot:
1.0724
My Preference:
Long positions above 1.0724 with targets at 1.1032 & 1.1150 in extension.
Alternative Scenario:
Below 1.0724 look for further downside with 1.0627 & 1.0527 as targets. To validate the Alternate Scenario, a weekly candle close below the pivot point is required. However, as of now, this condition has not materialized.
Comment:
Oscillator indicators show trend reversal divergence.
Trend Reversal Zone (TRZ):
TRZ1 1.0875 (achieved)
TRZ2 1.0793 (achieved)
TRZ3 1.0712 (achieved)
Price Targets Alternative Scenario (Resistance Levels):
R1 1.1032
R2 1.1479
R3 1.2084
Price Targets Alternative Scenario (Support Levels):
S1 1.0750
S2 1.0627
S3 1.0527
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