After persistent selling in the second quarter, the Euro was able to stabilize through the third quarter. Contributing to that balance was the market’s belief of resolution – at least , on the path to resolution – for concerns over the region’s growth, the trajectory of European Central Bank monetary policy, and the budgetary plans of the populist Italian government. Insofar as we held a neutral outlook for the Euro in the past quarter, we are slightly more optimistic on the Euro’s potential for the final three months. Trading conditions are expected to remain choppy, but directionally, Euro rates should be biased to the topside.
EUR/USD Price Chart: Daily Timeframe (September 2017 to September 2018) (Chart 1)
Recently, EUR/USD completed a bearish impulse wave from the February 2018-high to the August 2018-low. Conversely, a three-year up wave ended in April for EUR/CHF; therefore, anticipate a multi-quarter down wave at large degree to work down towards 1.0800 over time. Meanwhile, the Elliott Wave picture for EUR/JPY has muddied a bit, and the consolidation in EUR/GBP hints we are in a large Elliott Wave triangle pattern that may take several more months to complete. The EUR-complex forecast is longer-term bearish, though near-term appreciation may take place in Q4’18.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist and Jeremy Wagner, Head Forex Trading Instructor, CEWA-M