EUR/USD: forecast amidst an intensifying Russian-Ukranian war

The EUR/USD is trading near the 1.10 level, and is in free fall as the Russian-Ukrainian war intensifies. What is the next important level to watch from a technical analysis perspective?

The war in Ukraine started barely a week ago, and its devastating effects are already being felt everywhere. From the loss of life to the long-term economic consequences, war never brings good.

Western nations have imposed sanctions against the aggressor, Russia. However, the sanctions are also having an impact on European economies due to the fact that many European companies have left the Russian market in retaliation.

Moreover, Europe is facing a difficult period. Only five weeks ago, the ECB hinted that it would tighten monetary policy in the face of soaring inflation. Now that the conflict in Eastern Europe has begun, the ECB would probably postpone its plans.

Naturally, the common currency is the first to reflect the misery of war. The EUR/USD has dropped five hundred pips and is now trading near the 1.10 level.

So what comes next from a technical perspective?

Elliott wave theory signals more weakness to come
The Elliott Wave Theory is based on counting impulsive and corrective waves in the market. Technical traders use numbers for impulsive waves and letters for corrective waves.

For a good analysis, you have to go back to 2014. An impulsive wave started then, which ended with the election of Trump in the US. This marks the end of wave A, shown in blue - the first segment of a zigzag pattern.

What followed is an ABC or flat with a pattern of failure. Such a pattern signals a counter-trend force and also marks the end of wave B in blue.

At the moment the market is moving in an impulsive wave. Currently, the second wave is underway in the form of an ongoing correction. En route to completing the X wave, or conjunctive wave, it should break to a new low below 1.05.

In summary, EUR/USD is bearish and parity is the next major level to watch for.