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Stronger Dollar: A Monday Morning Puzzle
News does not create a trend; prevailing market psychology does.
Here's a Monday puzzle for you: On the morning of April 20, the dollar pushed the exchange rate with its main "competitor" (the euro) below the "psychologically-important" $1.30 level for the first time in weeks -- to an intraday low of $1.2897.
Why in the world is the dollar getting stronger against other currencies when "everyone knows" it should be crashing, considering the exploding debts of the U.S. government?
One answer: Stop falling for "fundamental" arguments. They often "make sense," but the "sense" is not what drives the forex markets -- they are driven instead by emotions, namely fear and greed. Price goes not where it "should," but where the collective psychology of participants takes it. It's a hard fact to accept. But, unless you do, you will be surprised by the markets' behavior again and again.
News does not create a trend; prevailing market psychology does. To track and predict it, you can study Elliott wave patterns in market charts. Based on the larger Elliott wave patterns in the EUR/USD, for example, all last week our intensive Currency Specialty Service held a firmly bullish stance on the dollar and made this forecast before the rate slid below $1.30:
Update For: Monday
Posted On: Sat, 18 Apr 2009 02:09:26 GMT
EURUSD Last Price: 1.3045
[Lower] Four straight sessions with lower closes, culminating with the sound break of 1.3091 on Friday leaves the bear trend intact. The most aggressive count calls for a sustained decline in a third of third wave. The next area to watch lies near 1.2950...
The larger Elliott wave patterns continue to suggest that the USD is not finished. Get a good idea of where it's going now -- before it gets there -- with EWI's intensive Currency Specialty Service.