The dollar/Swiss exchange has moved sideways for most of June and July, as this chart shows:
The forex pair also lacked direction this past Monday (July 11). For anyone not familiar with Elliott wave analysis, there was no reason to think that a drop to new record low was about to begin. Yet for the editor of EWI's Currency Specialty Service Jim Martens, the picture -- Elliott wave picture, that is -- was full of meaning.
Jim saw a classic "contracting triangle" wave pattern underway in the USD/CHF. Here's what you should know: It's a corrective move labeled ABCDE on a chart. You know you're looking at one when you see that signature "wedge" shape. Most importantly, contracting triangles resolve with a price breakout in the direction of the previous trend ("thrust") -- in this case, down.
That knowledge allowed EWI's Currency Specialty Service to propose the bearish wave count you see in the chart above. Here you see what happened next:
Jim Martens says that the risk-management factor is what made the July 11 setup so appealing. "The point of ruin" -- the price point where the contracting triangle scenario would not be valid -- was so close to the current price on July 11 that the USD had to start lower immediately to prove this count correct. The risk/reward ratio was extremely attractive.
EWI's Currency Specialty Service gives you daily and intraday updates on the USD/CHF -- 24 hours a day, literally. Get the latest Elliott wave forecasts for this and 12+ other forex pairs now >>
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