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Having risen from the 1.2000 level last July to the 1.3700 level last week, political concerns seem to have dampened the euro’s rally, as Yohay Elam of ForexCrunch.com offers a preview of what to expect before Thursday’s ECB meeting.

24 hours back we were still observing bullish counts on EUR/USD, but the sharp fall invalidates it, which means that something is changing. Notice that the pair reversed from its highs in a clearly impulsive fashion through the channel support line of the latest bullish run, connected from 1.3262.

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The pair closed well bellow that trend-line, which is important evidence for a temporary change in trend. As such, we need to respect this price action and immediately re-adjust the wave counts. The current structure suggests that EUR/USD will make a minimum three-wave decline from 1.3710, because this is the minimum structure of a corrective price action.

Ideally we will see a simple zig-zag, labeled as an A-B-C move. Currently, the price is still falling within wave A so we will see more sideways and bearish price action beneath 1.3400 and possibly to 1.3315 triangle pivot level after a wave B pull-back, which will probably unfold ahead of the ECB rates decision on Thursday.

By Yohay Elam, Founder, Writer, and Editor, ForexCrunch.com