Will EUR experience further decline?
Eurusd is in a vulnerable position after the unexpected Brexit vote on 24th. While nearly half of the British voters wanted to keep their identity as a “European” superpower, it just wasn’t enough to keep Britain in the EU. Not only both currencies (EUR and GBP) are expected to go through a turbulent period, but also the affects of Brexit are still rippling globally.
As speculation grows regardless, traders will try even harder to get their analysis right, just to be in the right side of the market. We prefer to stay with technical analysis, specifically the EURUSD Elliott wave analysis. Because news events and market reaction to those events could become highly unpredictable in the current conditions. This is not to say technical analysis is more accurate than trading purely on fundamentals.
But no one knows for certain if Brexit will prove to be favorable for GBP, EUR, both or neither. Only time will tell.
What does Brexit mean?
A layman’s view:
In general terms, Britain was a resourceful contributor and a strength for the EU. So logically, EUR may expect more decline regardless of the direction of GBP. The problem is though, the same is true with regard to GBP as well. It is in fact a stranglehold for EU as a region. This also explains the expectation of a medium-term corrective structure, explained in the GBPUSD Elliott waves analysis.
United we stand, divided we fall
This is a famous phrase, but its obviously not precise enough as a strategy. An important element of a solid strategy is consistency. Not only in the outcome of trades, but also as a method to pin-point entry and exit levels. Time and time again we are amazed at how price travels and creates predictable wave structures. Is it not sensible to recognize or at least attempt to recognize these wave-patterns? Rather than shooting in the dark for few pips here and there…
Again, the question is, where is EURUSD heading? Obviously the trend has been bearish since the 1.16163 high of 3rd May 2016. One may argue that price is in a small rally against the trend. But the structure and the personality of the rally is clearly of corrective nature. Also the wave counts and expectations of higher degrees are bearish as well. So anytime soon, a short/medium term decline is expected.
Medium/long forecast is a five to six hundred pip decline down to 1.0500 to 1.0550 levels. A “sharp” decline is of high probability because there is fear and doubt about Euro’s immediate future after Brexit.
As much as Brexit influenced the decline of EUR, an appreciating USD too can fuel the price even further down.
This is a no doubt more bad news for EUR, technically. According the Elliott wave analysis, EUR will decline further in value against the USD and perhaps against GBP as well.