by Vadim Pokhlebkin
Updated: June 16, 2017
To forecast the markets, you can watch the news ...
... Or, you can watch price patterns.
The latter approach will often get you better results. Case in point: Price action in the euro/dollar, or EURUSD, right around the time of the Fed's latest announcement on interest rates.
As is often the case before a big news event, EURUSD went mostly sideways into the June 14 Fed meeting. Traders were waiting to see what the Fed does and says. But here's what Elliott wave forex traders saw.
Sideways trading very often takes the shape of an Elliott wave pattern called "contracting triangle." It's a sideways move that subdivides into waves A, B, C, D and E. What's even more important to know is where in the larger trend contracting triangles most often appear -- namely, in the wave 4 position of a basic 5-wave Elliott wave sequence. When the contracting triangle pattern ends, the market "thrusts" in the direction of the previous trend -- in wave 5, the final push. Then comes a trend reversal.
And now, with that knowledge, take a look at the seemingly chaotic volatility in EURUSD on June 14-15.
One day before the Fed's announcement on June 13, the editor of our Currency Pro Service, Jim Martens, tweeted:
$EURUSD hasn't budged. A contracting triangle Elliott wave pattern? Seems likely, given Fed's interest rates announcement at 2 PM Wednesday.
Then, on Wednesday, an hour before the interest rates announcement, Jim posted this intraday update for subscribers:
Posted On: June 14, 2017 01:00 PM
Bottom Line: The poke above 1.1285 satisfied our upside expectations. The risk is shifting to the downside in front of the FOMC announcement due at 2:00 PM ET.
(Last Price 1.1268): The poke above 1.1285 earlier satisfied our minimum upward expectations for a possible thrust from a triangle. ...a turn lower is due. The timing coincides with the FOMC announcement due about an hour from now. The situation might resemble the set-up we spotted in cable prior to the vote that occurred in the UK last week. At that time we suggested sterling was poised to weaken regardless of the outcome of the vote. The same might be true regarding the dollar regardless of the FOMC decision. At a minimum, both scenarios warn upside potential should prove limited and both patterns are often abruptly reversed. -- Jim/p>
"Abruptly reversed" was exactly what EURUSD did shortly after the Fed's interest rates statement:
The market can only go one of three ways: up, down or sideways. It sounds like catching the right move should be simple. And yet, if you've tried your hand in trading, you know that it's anything but -- because, all too often, trends seem to change with no rhyme or reason.
Elliott wave analysis offers you a forecasting method that helps you peek around that next corner -- sometimes, even two "corners" at once.