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20.10.202618:51 Forex Analysis & Reviews: EUR/USD Analysis – October 20: The Euro Remains Weak as the Pound Gains Momentum

Relevancia 15:00 2026-10-21 UTC+00

The Elliott wave structure on the four-hour chart for EUR/USD has become more complex. On the higher time frame (lower chart), the downward trend segment has taken the form of a five-wave structure, A-B-C-D-E, which could be completed at any time, as it appears structurally complete. All the waves in this segment are approximately equal in size, so this structure is considered corrective. If this assumption is correct, an impulsive upward trend segment will begin once the correction is complete, with targets well above the 1.2000 level.

On the lower time frame (upper chart), an impulsive wave sequence is still developing and may belong to wave E of the higher time frame. If this is indeed the case, the dollar's strengthening is nearing its end, regardless of how far it rises in the meantime. The presumed wave 5 of E has either been completed or is close to completion. In either case, the current wave structure suggests that the downward wave sequence is nearing completion on both charts. The news backdrop and a sharp shift in market sentiment have driven a strong rise in the US currency, but the number of new reasons for further dollar appreciation is gradually declining.

The British Pound Is Receiving Support and Pulling the Euro Higher

EUR/USD rose by 10–20 basis points on Tuesday, which is far too little to suggest that the euro has gained the upper hand, even over a one-week period. The euro remains extremely weak, while the market continues to focus on further Federal Reserve monetary policy tightening and ignore all other factors. Even the unrest in France is no longer being taken into account, as this factor, although potentially dangerous, is expected to have only a short-term impact. At least, that is how the situation appears at present.

Meanwhile, the British pound is attracting demand. The UK released a favorable unemployment report today, significantly improving market sentiment ahead of tomorrow's inflation data. The pound gained approximately 75 pips today, but its direction will ultimately be determined on Wednesday, when the September inflation report is released.

In fact, many traders recognize that the Bank of England will tighten monetary policy even if inflation rises only slightly in September or remains unchanged. In other words, whatever the Consumer Price Index reading tomorrow, the need for an interest rate hike will remain. However, the higher inflation rises in September, the further it could increase by the end of the year.

Andrew Bailey and his colleagues believe that inflation will peak at 4%. The Bank of England's chief economist, Huw Pill, has also suggested that there could be two or three rounds of monetary policy tightening. Therefore, tighter policy remains the expected course of action in any case. The market is finally beginning to look beyond the dollar and consider other factors. It would be helpful if it also took the prospect of ECB monetary policy tightening into account. In my view, the euro and the pound could continue rising this week.

Exchange Rates 20.10.2026 analysis

General Conclusions

Based on the EUR/USD analysis, the pair remains within a global corrective trend structure labeled A-B-C-D-E. However, this structure appears complete and could have reached its endpoint. In my view, this is a favorable time not only to consider buying the euro but also to anticipate the development of a full upward trend segment. According to the higher time frame, the pair could rise to at least the 1.1700–1.1800 level. The failed attempt to break above 1.1126, corresponding to the 50.0% Fibonacci retracement level (lower chart, higher time frame), also indicates that the market may be preparing for a move higher.

The higher time frame shows a downward trend segment that has taken the form of an A-B-C-D-E structure. The internal wave structure of wave E has developed into a five-wave impulse and may already be complete. If this assumption is correct, a new upward trend segment will now begin to form.

Key Principles of My Analysis

  1. Wave structures should be simple and clear. Complex structures are difficult to trade and often involve changes in the market structure.
  2. If the market situation is unclear, it is better to stay out of the market.
  3. There can never be complete certainty about the direction of price movement. Do not forget to use protective Stop Loss orders.
  4. Elliott wave analysis can be combined with other forms of analysis and trading strategies.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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