How
Analyzing Forex with Elliott Wave Can
Help You Catch Both Rallies and Declines
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:
FreeWeek
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!
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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