Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
EUR/USD and Bearish Formation on Horizon - 26th Sep 17
Why Left Wing Nuts Get Away with Murder - 26th Sep 17
BREAKING NEWS - United States Galloping Towards Nuclear War with China Proxy North Korea - 26th Sep 17
Here’s Why Turkey Can’t Stay Out Of Syria - 25th Sep 17
Hidden Gems Shows A Foreboding Stock Market Future - 25th Sep 17
10 Reason You Should Use Ridesharing To Save Money - 25th Sep 17
Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder - 25th Sep 17
Stock Market Mixed Expectations, Will Stocks Continue Higher? - 25th Sep 17
22 charts and 52 questions that will make you Buy Gold - 25th Sep 17
Speculation Favors Overall Higher Silver Prices - 25th Sep 17
The Advertising Breakthrough Revolutionizing Gaming - 25th Sep 17
Stock Market Forming a Reluctant Top - 25th Sep 17
Grid Forex Strategy - All You Need to Know - 25th Sep 17
Catalonia, Kurdistan, Patriotism, Flags and Referendums - 24th Sep 17
Two Key Indicators Show the S&P 500 Becoming the New ‘Cash’ - 24th Sep 17
The Felling of Sheffield's Big Street Trees 2017 - Dobcroft Road - 24th Sep 17
Advantages of Forex Trading - 24th Sep 17
Stocks, Gold, Dollar, Bitcoin Markets Analysis - 23rd Sep 17
How Will We Be Affected by a Series of Rate Hikes? - 23rd Sep 17
Fed Quantitative Tightening Impact on Stocks and Gold - 22nd Sep 17
Bitcoin & Blockchain: All Hype or Part of a Financial Revolution? - 22nd Sep 17
Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms - 22nd Sep 17
Will North Korea Boost Gold Prices? Part I - 22nd Sep 17
USDJPY Leads the way for a Resurgent Greenback - 22nd Sep 17
Day Trading Guide for Dummies - 22nd Sep 17
Short-Term Uncertainty, As Stocks Fluctuate Along Record Highs - 21st Sep 17
4 Reasons Gold is Starting to Look Attractive as Cryptocurrencies Falter - 21st Sep 17
The 5 Biggest Bubbles In Markets Today - 20th Sep 17
Infographic: The Everything Bubble Is Ready to Pop - 20th Sep 17
Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years - 20th Sep 17
Stock Market Waiting Game... - 20th Sep 17
Precious Metals Sector is on Major Buy Signal - 20th Sep 17
US Equities Destined For Negative Returns In The Next 7 Years - 3 Assets To Invest In Instead - 20th Sep 17
Looking For the Next Big Stock? Look at Design - 20th Sep 17
Self Employed? Understanding Business Insurance - 19th Sep 17
Stock Market Bubble Fortunes - 19th Sep 17
USD/CHF – Verification of Breakout or Further Declines? - 19th Sep 17
Blockchain Tech: Don't Say You Didn't Know - 19th Sep 17
The Fed’s 2% Inflation Target Is Pointless - 19th Sep 17
How To Resolve the Korean Conundrum  - 19th Sep 17
A World Doomed to a Never Ending War - 19th Sep 17
What is Backtesting? And Why You Need Backtesting System? - 19th Sep 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

EURUSD: When Price Pattern Trumps Other "Reasons"

Currencies / Euro Mar 08, 2017 - 06:31 PM GMT

By: EWI

Currencies

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

[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

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.


© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife