EUR/USD Elliott Wave Analysis: Gap Down Fully Retraced

EUR/USD Gaps Down on Trump Tariff Announcement

Over the weekend, announcements of tariffs in place by President Trump caused EUR/USD to gap lower on broad based USD strength. It was approximately a 130 pip gap which is large for forex. This gap has been fully retraced providing evidence it was an exhaustion gap.

EUR/USD Elliott Wave Analysis

EUR/USD has been trending lower since September 2024, covering a range of nearly 1000 pips.

Our review of the technical charts using Elliott wave analysis shows that a major low may be in place and a large rally is underway.

Our view is that the decline from September 2024 is an ending diagonal wave C of (2). In the chart above, the ending diagonal is colored in blue. As the name implies, an ending diagonal is an ending pattern of a larger wave sequence. In this case, it ‘ends’ the pattern that began January 2023 as a large sideways flat.

The low on January 13 at 1.0177 appears to be the end of the two year suggesting the next rally could unfold over months and possibly years.

One common feature of the ending diagonal is that the next wave tends to be a swift retracement. This implies a large and swift rally is underway to target the origin of the diagonal (1.1214). This new bullish trend wave (3) is early in development.

The gap down this weekend merely retested the topside of the blue ((ii))-((iv)) trend line of the ending diagonal. This trend line provided a springboard for wave (iii) of 1 of (3) to kick off to the upside.

Initial targets for wave (iii) is 1.08 and possibly 1.12.

If the EURUSD price unexpectedly falls below 1.0177, then we’ll need to reconsider the larger wave count. For the time being, several Elliott wave models point to further gains above 1.05 with 1.08 serving as an initial target zone.

Key Level for Bullish Bias: 1.0177

Initial Target: 1.08

Secondary Target: 1.12