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EURUSD: A Lull Before the Storm?
"...a turn is underway, and risk is defined and limited relative to reward."
For six weeks now, the euro-dollar exchange rate, known to forex traders as the EURUSD, has gone nowhere. While we've seen some big ups and downs, their net progress has been close to zero: Today, the rate stands near $1.29, where it was in late October.
You may say, after last week's devastating U.S. jobs report the dollar has already lost big – and it's only the beginning. From the standpoint of the conventional economic wisdom, that's true. Of course, it's the same "wisdom" that was calling for the dollar's complete collapse back in July of this year, when the EURUSD was at $1.60. Since then, the U.S. economic picture has only gotten weaker – while the U.S. dollar has only gotten stronger, pushing the EURUSD as low as $1.24 in late October.
Now you understand why us Elliotticians don't put too much faith in the presumed effects of the economy on the markets, and vice versa. For Elliotticians, market forecasting is all about reading chart patterns.
Wave analysis describes thirteen patterns that all market action falls into. The most basic of those are an impulse and a correction. An impulse consists of five non-overlapping waves labeled 1-2-3-4-5. Impulses unfold in the direction of a larger trend. An Elliott wave correction consists of three overlapping waves, labeled A-B-C; corrections move against the larger trend.
Now, going back to this month's rally in the EURUSD, take a look at its internal structure in the chart below. (You can see this chart fully labeled with Elliott wave symbols online now, inside the December 9 Currency Specialty Service daily forecast for the EURUSD:)
Remember, Elliott wave impulses do not overlap, while corrections do. Would you say that the latest EURUSD rally (between the second set of trendlines) looks impulsive or corrective?
The corrective internal structure of this rally is just one of the reasons why Jim Martens posted this note for his subscribers inside Tuesday's (Dec. 9) Currency Specialty Service intraday updates:
"At this moment it's all about risk management. We believe a turn is underway, and that risk is defined and limited relative to reward."
The EURUSD may indeed be offering a good opportunity right now – and, in Jim's words, "risk/reward is on our side." Find our more now with Currency Specialty Service.