EUR/USD Elliott Wave: Temporary New Highs

Executive Summary

• Wave (2) corrective decline continues from 1.1918.
• Wave B of (2) may have topped yesterday at 1.1918.
• Decline to 1.12 – 1.1391 and possibly lower levels are anticipated.

EURUSD has rallied to fresh 4-year highs on the heels of the Fed’s 25 basis point rate cut. Yesterday’s high may have printed the end to a corrective rally, leading to a decline in an ongoing wave 2.

Current Elliott Wave Analysis

EURUSD reached its highest level since 2021 yesterday printing 1.1918. It appears EURUSD was rallying in wave ‘B’ of a larger flat corrective pattern that began on July 1.

An Elliott wave flat pattern subdivides as 3-3-5 and is labelled A-B-C. The first leg, wave A, moved lower reaching 1.1391 on August 1.

Wave B then trended higher as a w-x-y pattern, a double zigzag. It is common for the adjacent waves of a flat, waves A & B, to contain different complexities. In this case, wave A was a simple zigzag while wave B was a double zigzag.

It appears wave B completed at yesterday’s high because within wave B, wave ((y)) was equal to the length of ((w)). This is a common wave relationship. (see blue Fibonacci extension line).

As a result, we are anticipating the beginning of a decline to carry down and retest the previous low at 1.1391. 

An early warning signal the decline is in force if EURUSD breaks below the purple support trend line. If this breaks, then it will build confidence a top is in place and that EURUSD may trend towards 1.1391. Near this same price is the 23.6% Fibonacci retracement of wave (1), the 2025 uptrend.

If EURUSD is successful in pushing below 1.1391, the next layer of support is the 38% Fibonacci retracement level near 1.12.

Bottom Line

The Elliott wave corrective wave 2 is reaching its final leg lower. The expanded flat pattern began July 1 and we are anticipating 1.12 – 1.1391, and possibly lower levels, in the coming weeks.

If EURUSD breaks out above 1.1918, then we’ll reconsider the wave count.