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U.S. Dollar: Speculation Aside...
Elliott Wave International shows how the knowledge of wave analysis could have helped you be prepared for the recent all-time low in the U.S. dollar.
Before the U.S. dollar fell to a new all-time low against the euro last week, opinions were divided on whether or not that would actually happen. Most of the arguments revolved around the U.S. Federal Reserve interest rates policy.
Problem is, despite many analysts' claims, there is no persistent positive correlation between the U.S. dollar and interest rates. In fact, throughout much of the 1970s and 1990s, the correlation was negative. So any speculation about the Fed and the dollar is mostly just that – speculation.
But what if you could cut to the chase and look at the dollar's position with more objectivity?
Here's an excerpt from a Market Insight comment that Elliott Wave International's Senior Currency Strategist, Jim Martens, posted for subscribers of his Currency Specialty Service on February 13 – two weeks before the dollar slid to a new all-time low:
Posted On: Wed, 13 Feb 2008 04:04:00 GMT
This week is a good example of the importance of having market perspective for identifying the trend.
Looking at the dollar, it's obvious that it hasn't gone anywhere since November. The buck has been range-bound. So we have to look back to before the start of the consolidation to see the trend. In this case, it's obvious the dollar was falling. A consolidation represents just a pause in an ongoing trend. We can conclude that the downtrend is intact, the dollar stability since November represents just a pause – and not a reversal.
A key formation supportive of this conclusion is the apparent three-wave recovery from the low established in November to the high a month later. Three-wave movements are corrective. By definition, if the rise is a correction, the trend must be to the downside.
And before the November low, there was an extended slide from August. That sharp, relentless decline displays all the characteristics of a third wave. If that decline is a third wave then, again by definition, there must have been a first and second wave – and there is a fourth and fifth wave to come before the sequence ends. And that means the dollar decline is incomplete and a new low will be established.
This is all about having market perspective. Many of you think that if you "operate" on an intraday basis, the larger trend loses its importance. That's not the case. The larger trend is always important.
This discussion also reveals the process I employ when I look at a chart. It's simple. It's basic. It works. And it starts with identifying the general market trend. ...JJM...
Don't miss out: Jim Martens post his Market Insights – along with his weekly video updates – for the subscribers of his Currency Specialty Service regularly.
Right now, says Jim, there are reasons to believe the USD may get stronger soon. Read Jim's complete reasoning online now – details are below.