On November 1, the EUR/USD — the euro-dollar exchange rate
and the most actively-traded forex pair — was trading the $1.38
range, near the level it is today.
But if you look at what the EUR/USD did between November 1 and
9, you’ll see a huge 400-point (or pip, in forex lingo) rally
into the November 4 top — and an equally huge decline back to
the levels we see today.
That’s an 800-pip “round trip” in just six trading
days — a huge move which obviously caught a lot of the U.S.
dollar bears and bulls by surprise. Could you have seen
it coming?
If you know how to analyze currencies with Elliott wave, the
answer is probably “yes.” Wave analysis helps you
identify patterns in market charts and tells you how
those patterns — ideally — should develop. In other words,
Elliott allows you to narrow down multiple possibilities to
a handful of probabilities.
A probability is never a certainty. But it’s better than a shot
in the dark, as this example demonstrates.
On November 1, Elliott Wave International’s Currency Specialty
Service posted the following end-of-day forecast. (Some
Elliott wave labels removed for this article):
[Higher, into a top] The euro is poised to thrust above 1.4160.
The question is if the thrust takes place before the FOMC announcement
and ends afterward, or starts in response to the announcement.
Before or after, the euro should hit new highs.
What gave Currency Specialty Service the confidence
to make that forecast? It was the “contracting triangle” pattern
you see in the chart above. They often appear in 4th waves, right
before the market’s final push in wave 5. The EUR fulfilled the
forecast with a 400-pip rally into the November 4 top. The following
day, our Currency Specialty Service wrote:
The euro is reversing course after a thrust from a triangle. The
decline from 1.4283 might not be in five waves, but it has
the characteristics of an impulsive wave. A correction
of the rally from August should reach the 1.3636-1.3700 area,
the 38.2% retracement of the advance…
…which brings us to the price levels where we find the EUR/USD
today. And if you’re curious to know what Currency Specialty
Service has to say now, you have a great opportunity:
is live through noon EST on Thursday, November 18! You
can access all the intraday, daily, weekly and monthly forecasts
from EWI’s Currency Specialty Service right now
through noon Eastern time Thursday, Nov. 18. This service
is valued at $494/month, but you can get it free! Click
here to access Currency Specialty Service FreeWeek.
This
article was syndicated by Elliott Wave International and
was originally published under the headline How Analyzing Forex with Elliott Wave Can Help You Catch Both Rallies and Declines.
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.
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