On November 9, the EUR/USD (exchange rate between the euro and U.S. dollar and the world's most traded forex pair) fell some 300 pips; a 3-cent gain by the dollar.
The euro's sell-off was universally attributed to the bad news about Italian debt. And while that sounds reasonable, could you have anticipated this euro weakness before the news?
You could.
EURUSD (Intraday)
Posted On: Nov 7 2011 3:44PM ET / Nov 7 2011 8:44PM GMT
Last Price: 1.3776
[Lower] There are alternate counts available, but given the overlapping rise from 1.3609 all [wave counts] lead to euro weakness. The question is whether 1.3877 is exceeded first. Another three-wave bounce, this time from 1.3682, keeps the euro under pressure. The bearish outlook stands.
What made this forecast possible? You may or may not realize that Elliott wave patterns in market charts reflect collective mindset of the market players. Their mindset is either bullish or bearish. The bearish-looking wave patterns on November 7 showed that the euro was likely headed lower.
The forex market took the November 9 news from Italy as an excuse to start selling. But it could've just as easily been any other news report, or no news at all -- as the market's mindset was clearly bearish as early as Monday.
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