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EURUSD Rally: A Correction or a New Euro Bull Market?
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By Vadim Pokhlebkin
Tue, 18 Jan 2011 22:15:00 ET |
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Over the past ten days, the euro has gained almost 600 pips, or 6 cents, against its main rival, the U.S. dollar, moving the EURUSD in the mid-$1.34 range.
Forex analysts have attributed the rally to a variety of factors, but mostly to hopes that the European sovereign debt crisis has been halted. The news makes it sound like there simply hasn't been a good reason to sell euros lately -- but from an Elliott wave perspective, the reasons for the EURUSD rally have been quite different.
Our January 11 Free Update article reported that at the time -- before the "bullish" news from Europe had emerged -- Elliott Wave International's Currency Specialty Service was already calling for a EURUSD to rise, based only on Elliott wave patterns. The advance was expected to be corrective -- that is, moving against the main trend. In Elliott wave terms, it was labeled wave 2 -- of waves 1, 2, 3, 4 and 5, that is.
The question is, now that the EURUSD rally has moved this far, does it still qualify as wave two? To answer that, you need to step back and take a look at the larger picture. Currency Specialty Service presents an updated daily EURUSD chart every evening; here's one from January 18 (some Elliott wave labels were removed for this article):
As you can see, on a larger scale there is still a perfectly legitimate way to label the advance as a continued wave 2; "recent setback maintains its corrective shape," says Currency Specialty Service.