EUR/USD has been under pressure for over two years now. The pair reached 1.2556 in February 2018, but has been making lower lows and lower highs ever since. Yet, the past couple of weeks painted a different picture.
Between May 18th and May 29th, the euro surged 325 pips against the U.S. dollar. In those ten trading days EUR/USD rose from 1.0820 to as high as 1.1145. And while hardly anyone can explain the rally with any certainty, there was a way for traders to actually stay ahead of it. No, it had nothing to do with the economy or geopolitics. Take a look below.
EURUSD-May 18th-1 Hr Chart
The chart above was included in the premium analysis sent to subscribers before the open on Monday, May 18th. It revealed a bullish Elliott Wave setup, formed by a five-wave impulse up to 1.1148 and a simple a-b-c zigzag correction. It is interesting to notice that wave ‘b’ of the correction was an expanding flat.
According to the theory, once a correction is over, the larger trend resumes in the direction of the impulsive sequence. We thought wave ‘c’ was over at 1.0767. So as long as this level was intact, it made sense to expect more strength in EUR/USD. The updated chart below shows how the situation unfolded.
EURUSD-May 30th-1 Hr Chart
The pair started rising almost immediately. On Thursday, May 21st, it took out 1.1000. A small dip dragged it back down to 1.0871 on May 25th, but it couldn’t stop the bulls. Fast-forward to May 29th and EUR/USD was hovering above 1.1140 again. 1.0767 was never breached.