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EUR/USD: A Trade Setup You Can Use Again. And Again. And Again.
The way we trade the markets changes, but human nature does not.
By Vadim Pokhlebkin
Thu, 02 Aug 2012 20:00:00 ET
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In the financial markets, "two weeks ago" is often synonymous with "ancient history." With so much new information coming at you daily, few care about what happened then -- most only care to know what happens next.

But in the field of technical analysis, which makes forecasts based on the repetitive nature of price patterns, looking at the past is precisely the way to learn what trend to expect next.
 
Consider an example from not so ancient history: July 24, a little over a week ago. That day, stocks around the world fell; so did the euro against the U.S. dollar. The headlines said:
 
  • Global stocks, euro tumble on European debt fears (Reuters‎)
  • Germany, Netherlands Rating Outlooks Cut to Negative by Moody's (Bloomberg) 
You could hardly find any "fundamental" factor to be optimistic about the euro that day. Yet from the perspective of Elliott wave analysis, that was the right moment to turn bullish on EUR/USD. In fact, our forex-focused Currency Specialty Service did so a day before, on July 23.
 
Update For: Tuesday, July 24
Posted On: Mon, 23 Jul 2012 21:11:36 GMT
EURUSD
Last Price: 1.2120
 
[Forming a bottom] Allowing for a new low beneath 1.2067, toward 1.2022, the euro decline from mid June and from March is ending. Now that the popular press has caught on to the story we're looking to close the book. Once it begins, the coming correction should reach the 1.2324 area...
 
 
The next day, EUR/USD fell to 1.2046 -- and then over the next few days rose as high as 1.2387. Compare those figures with the price targets in our July 23 forecast you see above.
 
Here's what helped our forex analysts catch that July 24 bottom:
 
  1. A nearly completed 5-wave Elliott wave pattern to the downside you see in the chart above.
  2. A negative market sentiment towards the euro. See, after the long EUR/USD decline, the popular media all but accepted the euro's weakness as permanent. From a contrarian point of view -- coupled with the bottoming Elliott wave picture -- that told us that the trend was shifting to the upside. 
This "not-so-ancient-history" example is important, because you will see a similar setup again. And again. And again. The way we trade the markets changes, but human nature does not. That's why Elliott wave patterns, which reflect the shifts in the collective mood of the marketplace, continue to operate in forex and other markets.
 
Currency Specialty Service has our latest EUR/USD forecasts online for you right now.
 

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Tags: currency, Elliott wave, Elliott Wave trading, euro, forex, U.S. dollar
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