Category: Currencies
Forex: Dollar Rebounds After Hitting New Lows
Can you use the same "fundamentals" to justify both bullish and bearish market action?
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| By Vadim Pokhlebkin |
Published: Wed, 16 Apr 2008 18:00:00 ET |
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The U.S. dollar fell to a new all-time low against the euro on April 16, pushing the euro-dollar exchange rate to within a few pips of $1.60. Analysts found these reasons to blame to move on:
"The dollar fell to a record low against the euro as European inflation accelerated last month, reducing chances the European Central Bank will follow the Federal Reserve in cutting interest rates. The U.S. currency has fallen almost 1 percent against the euro since Group of Seven finance ministers said after meeting in Washington on April 11 that they're concerned 'sharp fluctuations' in currency markets may hurt the global economy. Work began on 947,000 U.S. homes in March at an annual rate, down 11.9 percent from February and the fewest since March 1991, the Commerce Department said." (Bloomberg)
All these sound like legitimate reasons. But what if the EUR/USD moved down on Wednesday instead? Can you imagine an explanation like this one?
"The euro fell against the dollar today as European inflation accelerated last month, reducing chances the European Central Bank will cut interest rates to stimulate the economy. The European currency has fallen against the U.S. dollar since Group of Seven finance ministers said that they're concerned 'sharp fluctuations' in currency markets may hurt the global economy, suggesting a possible market intervention by the G-7. Work began on 947,000 U.S. homes in March, the fewest since March 1991, prompting some analysts to speculate that the multi-year low may be a sign the worst is over for the U.S. real estate market."
Sounds just as legitimate, doesn't it? Of course it does; that's the beauty of "fundamental" explanations.
What you cannot twist to fit both bullish and bearish market action at once are Elliott wave counts. If you've done your job right, having observed the Three Rules of Elliott and most of the guidelines, you can only end up with one legitimate forecast.
Jim Martens, Elliott Wave International's Senior Currency Strategist, posted this forecast and chart for readers of his Currency Specialty Service on the evening of April 15 -- hours before the EUR/USD spike started (some labels erased for this publication):
EWI's Currency Specialty Service brings you forecasts of the major and minor currency pairs 24 hours a day. Learn more here.
Update For: Wednesday
Posted On: Wed, 16 Apr 2008 00:53:00 GMT
EURUSD [Last Price]: 1.5792. [Higher, into a peak] The setback from 1.5914 is in a corrective three waves, as is the subsequent setback from 1.5885, so we continue to favor the upside.
You should also know this: that same evening, April 15, Jim Martens warned subscribers that, "The chart reveals one possible count: A diagonal fifth wave would allow for fresh highs to coincide with new lows in $CHF and $JPY. But the count does warn that the larger rally is in its ending stages..."
To get Jim Martens' latest thinking on the EUR/USD and other majors, have his forecasts on your screen in minutes.