An examination of the monthly chart (see below) shows the euro trading within a broad Symmetrical Triangle pattern since 2009. Ultimately, this is anticipated to break to the downside, with Elliott Wave mathematical targets of 1.1095, 1.0780 and .9305. Upon completion, the classical symmetrical triangle objective will be around .8950.
EURUSD monthly chart
Dissecting the daily chart, for greater detail, the euro is interpreted to be within an “initial” 5 wave impulse sequence from this year’s May peak of 1.3990 and a final 5th Wave decline is now underway (see daily chart below).
The mathematical downside targets for this 5th Wave are: 1.2400 (where Wave 5/ will equal Wave 1/), 1.2100 (where Wave 5 will equal Fibonacci 1.618 X Wave 1/) and 1.1965 max. (where Wave 5/ will equal Fibonacci 61.8% of the distance of Waves 1/ - 3/). Also of note, triangle support lies in the low 1.2200s.
EURUSD daily chart 
Upon completion of this 5th Wave decline, the EURUSD can then be expected to undergo a corrective retracement of the “initial” trend decline from 1.3990. Such a corrective recovery (being Wave 2/) could be expected to retrace approximately 50% or 62% of this prior bearish move.
Another technical reason to expect an upcoming bottom in the low 1.2000s, late teens max. is that 1.2045 represents a major prior bottom (recorded in July 2012) and 1.1880 represents an even more significant bottom (recorded in June 2010). These levels (give or take 30 points) represent key classical chart supports (see monthly chart above).
Some banks are likely to fail the ECB stress tests, and a PIMCO report suggests that many more may just scrape a pass. Photo: Thinkstock
Potential for volatility
From a fundamental perspective, there is potential for volatility around the EURUSD when trading opens on Monday. A few hours before the Asian session begins, the European Banking Authority will release the long-awaited details of the bank stress tests conducted on its behalf by the European Central Bank.
As usual in these situations, the rumour mill is already in full swing. Yesterday Reuters posted a story which began as follows: "At least 11 banks from six European countries are set to fail a region-wide financial health check this weekend, Spanish news agency Efe reported, citing several unidentified financial sources. The results of the stress tests on 130 banks by the European Central Bank are due to be unveiled on Sunday". But shortly afterwards, the ECB was on the wire services cooling such speculation: "The ECB, which will publish the test outcomes for 130 banks on Sunday, said final results had not yet been sent to the lenders involved, and it could not comment on individual institutions. 'Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October,' said an ECB spokesman. The European Banking Authority, the EU watchdog coordinating the Europe-wide stress test, said the results would not be final until they are endorsed on Sunday just prior to publication. It had no comment on individual lenders" By the time the markets open in Europe today the banks will have been given their individual assessments. No doubt those (few) who pass with flying colours will leak the details while from the rest there will be stony silence. But perhaps of more interest than those who have failed will be the number who have just squeezed a pass mark, given that they have had months to bolster their capital, assuming anyone would provide it to them. A report by PIMCO suggested up to a third of the 130 banks tested will either fail or achieve only a marginal pass. We will see on Sunday, but it seems the prospects are not good. A test of the aforementioned chart supports may exhaust weakness for this year but any ensuing corrective retracement could be expected to take several weeks or months and in the process, probably encounter formidable resistance in the low 1.3000s, in preparation for the next sustained sell-off in EURUSD in 2015 (see the monthly chart above).