• 22 hours The Year Of The Retail Investor Keeps Getting Bigger
  • 2 days Airlines Could Recover, But Crew Remain Elusive
  • 2 days Meet The Man Behind The World's Most Exciting Oil Play
  • 3 days Crypto-Mining Immigration Could Be The Start Of A New Trend
  • 5 days Hawkish Fed Sends Gold Prices Crashing
  • 6 days Bezos Is Heading To Space This Sunday
  • 9 days El Salvador’s Surprise Bitcoin Move
  • 12 days Markets Unfazed As Inflation Hits 13-Year High
  • 13 days How the Token Economy is Disrupting Financial Markets
  • 15 days FBI Investigating 100 Types Of Ransomware Attacks
  • 17 days Fed Ends Corporate Credit Emergency Lending Program
  • 19 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 20 days The Real Reason Your 401k Has Been Lagging
  • 21 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 23 days The Market Is Ripe For Another GameStop Saga
  • 26 days Senate Grills Big Banks Over Pandemic Opportunism
  • 27 days Cannabis Has A Major Cash Problem
  • 28 days Ransomware Netted Criminals $350M In 2020 Alone
  • 29 days Russia Is Taking On Google
  • 30 days Chinese Regulators Deal Another Big Blow To Bitcoin
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Elliott Wave International

Elliott Wave International

Elliott Wave International

Elliott Wave International (EWI) is the world's largest market forecasting firm. EWI's 20-plus analysts provide around-the-clock forecasts of every major market in the world via…

Contact Author

  1. Home
  2. Markets
  3. Other

EURUSD: When Price Pattern Trumps Other 'Reasons'

EURUSD: When Price Pattern Trumps Other 'Reasons'

Waves of market psychology often warn of trend changes before the news -- see how

This was an eventful week in politics, monetary policy and the markets -- and to many observers, the three seemed to be linked.

On Wednesday (March 1), the U.S. dollar did something it hadn't done in almost two months: It got stronger. Two reasons were behind the move, said analysts: The Fed's imminent rate hike, and, President Trump's widely-covered address to Congress:

"The dollar hit a seven-week high on Wednesday after hawkish comments from two Federal Reserve officials late on Tuesday increased expectations that the U.S. central bank is closer to raising interest rates." (CNBC, March 1)

"U.S. Treasury yields rose along with the U.S. dollar...as investors...gave a sigh of relief after President Donald Trump's speech to Congress." (Reuters, March 1)

It's easy to attribute the dollar's sudden strength to those two stories, yet this adds up to a classic case of what we call post-market action rationalization. Yes, these are logical and satisfying explanations, but here is a litmus test for both: Next time the Fed makes a hawkish comment or the President speaks, what will the dollar do then?

There is no way to answer this using conventional market-forecasting tools, other than to say: Let's wait and see how the market reacts. But there is a better way.

As early as Monday (February 27), Elliott wave patterns in EURUSD, the euro-dollar exchange rate, already warned that the rally in the euro/weakness in the dollar was getting long in the tooth.

Said our forex-focused Currency Pro Service:

EURUSD
[Posted On:]
February 27, 2017 03:47 PM

EUR/USD From Feb 27

[Looking lower against 1.0679] (Last Price 1.0588): We are looking for a wave '(ii)' double zigzag correction top to form... And with an impulsive looking pullback occurring from 1.0630, a correction top may have been set already at that 1.0630 high point.

"Double zigzag" is Elliott wave speak for a complex correction. Even if you're not familiar with the method, the word "correction" tells you everything you need to know: It's a countertrend move that will likely be more than fully retraced once the trend resumes.

Which it did -- EURUSD fell, as expected. This March 3 Currency Pro Service chart shows you the extent of the euro decline/U.S. dollar rally (partial Elliott wave labels shown):

EURUSD
[Posted On:]
March 03, 2017 03:14 PM

EUR/USD From March 3

Now, it's hard not to notice that since that decline, EURUSD has rebounded. But again, the move is most likely part of (you guessed it) a correction.

So, no matter what you read in the news regarding the reasons for this latest euro rally, know that when the euro/dollar trend changes again, so will the mainstream's "reasons."

 


Introduction to the Wave Principle Applied

See how Elliott waves can improve your trading

In this free 15-minute video, EWI Senior Analyst Jeffrey Kennedy explains how to take the Wave Principle and turn it into a trading methodology. You'll learn the best waves to trade, where to set your protective stop, how to determine target levels, and more.

Get free, instant access now

This article was syndicated by Elliott Wave International and was originally published under the headline EURUSD: When Price Pattern Trumps Other "Reasons". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Back to homepage

Leave a comment

Leave a comment