Two weeks ago on Halloween night, while little kids were getting spooked by scary costumes, many of their parents were terrified by the prospects of the U.S. dollar sinking further against the world's leading currencies. Against the Japanese yen, on October 31, 2010, the greenback struggled to stay above the lowest level since World War II.
And, according to the fundamental experts, the dollar's downtrend was signed, sealed, and destined to continue as a slew of bearish factors stayed glued to the spot. On this, the following news items from two weeks ago capture the scene:
- "Dollar Edges To Post War Low Against Yen... as US economic data bolstered expectations of further credit easing. It looks like the day of reckoning is finally here for the US dollar." (Money Morning)
- "Confirmation of a possible terrorism plot against the US might have pushed investors into the perceived safety of the yen." (Associated Press)
- "Dollar Hits 15-year Low Against Yen following ... a weak reading on consumer sentiment. The dollar is poised to slide further." (Wall Street Journal)
YET -- on November 1, the dollar bucked its downtrend and began a powerful rally to a five-week high against the yen we see today. The greenback's "day of reckoning" was postponed yet again.
While "fundamental" analysts are figuring out why the dollar has gained when it was "supposed" to fall, EWI's Currency Specialty Service looks at the market through the objective lens of Elliott wave analysis and shows you the following labeled close-up of the USD/JPY. Here, the reason for the buck's turn up becomes clear: An Elliott wave pattern called "diagonal triangle" was completed at the November 1 low, to finish wave c of a larger a-b-c correction.
Diagonals are a five-wave pattern where each leg subdivides into three smaller waves: 3-3-3-3-3. They are terminating patterns and occur in waves 5 of impulses, or C-waves of corrections. This last part is especially important: diagonals equal the end of trend.
As for what's next for the dollar-yen exchange rate, you can find out exactly where EWI's Currency Specialty Service sees the likely turn at the unbelievable discount of 100% off. No, that's no typo. That's the benefit of EWI's FreeWeek event, which continues until noon EST on November 18.
Take advantage of the free Elliott wave forex forecast now and find out where the US dollar could be versus every major global currency in the hours, days, weeks and months ahead. Click here to begin.