EURUSD: Bearish Reversal Is Unfolding-Elliott Wave Analysis

EURUSD has been trading higher last week and reached highs around 1.3400 region from where pair reversed impulsively and suggests that highs are in. As such, larger ending diagonal appears complete and is now pointing for weaker EURUSD. We will be looking for sizable decline once 1.3180 support is taken out. Why 1.3180 support is important? Because that's swing low of wave four, and when floor of wave four is broken this means that trend has changed and that bearish waves are underway.

What is an Ending Diagonal?

An ending diagonal is a special type of pattern that occurs at times when the preceding move has gone too far too fast, as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes, they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.

• structure is 3-3-3-3-3

• a wedge shape within two converging lines

• wave 4 must trade into a territory of a wave 1

• appears primarily in the fifth wave position, in the C wave position of A-B- C and in double or triple threes as the final "C" wave