At EWI's Message Board, our subscribers and free Club EWI members ask us great questions daily. Here's a recent one:
"Doesn't the U.S. Treasury's looming extension of the U.S. debt limit even higher than it is today mean more pressure on the dollar?"
The question refers to a hot political issue: whether to raise the U.S. debt ceiling to yet another record high (over $14 trillion). That's a staggering figure, hence the question: Won't foreign creditors see that much debt as detrimental to the U.S. economy, and thus to the value of the dollar?
At first glance this "fundamentally"-based argument sounds legitimate... that is, until you do some research and realize that the U.S. debt ceiling has been raised 11 times since 1996 -- that's 11 out of the past 15 years. The U.S. dollar did not crash in the process; against the euro (its main competitor), it stands today about where it was in 2007.
You could say: True, the debt ceiling has been rising, but now it's getting too high! To which someone could reply: What's "too high"? Why was raising the debt above $12 trillion in 2009 acceptable, but the push over $14 trillion this year "too high"? Who's to say?
And just to show how "flexible" the "fundamentally"-based arguments can be, you could just as easily argue that it will damage the dollar NOT to raise the debt ceiling, and here's why: the Federal government will shut down, the U.S. cannot legally borrow any more money, which is a de-facto default -- and bad news for the buck.
Damned if you do, damned if you don't.
Elliotticians know that "fundamentals" do not drive broad market trends -- perceptions do. Elliott wave patterns in forex charts reflect the collective bias of market participants. When you follow wave patterns, you judge probabilities of where prices should go next objectively. No more arguing about the effects of this or that "fundamental" factor. Just pure Elliott.