Why Didn’t EURUSD Ride Democrats’ “Blue Wave” Higher?

Our January 7, our Currency Pro Service warned EURUSD was set to peak. See what – happened next -- and why

by Nico Isaac
Updated: April 01, 2021

Today is April 1, also known as April Fool's Day, a time of playful pranks and harmless hijinks. But, for many euro bulls, the entire experience of 2021 may feel like one long practical joke.

The reason being, since the start of the new year, the EURUSD exchange has experienced a prolonged sell-off to 5-month lows as of March 30.

In fact, according to a March 25 Yahoo! Finance, the euro has been the worst-performing currency among the Group of 10 nations.

The problem is, nobody has yet to pop out behind a corner to shout, "Just Kidding!" and cop to the whole euro slide being a giant gaff.

Alas! The euro's slide is very, very real despite its bucking bullish mainstream expectations at the start of 2021. At the time, one main event was cited as THE biggest catalyst for further euro gains and U.S. dollar demise; namely, the January 6 Democratic win for the U.S. Senate after Georgia's Warnock and Ossoff took the state's two seats.

Here, these news items from the time set the stage:

• "EURUSD Breaks Higher as Democrats Win the US Senate... the EURUSD is on a tear. This should mean that the US dollar continues to struggle, and therefore it should be good for this pair." (Jan. 6 Yahoo! Finance)
• "Surfers go out to sea also in winter -- and EUR/USD is catching the blue wave to ride to fresh highs near 1.2350." (January 6 FX Street)

And yet, despite the mighty call for the euro to ride the "blue wave" higher -- the currency instead wiped out against the greenback!

As it happened, the euro indeed was riding a wave at the time; not a political one, but an Elliott wave one.

Here, we flip back to our Currency Pro Service, where on January 7 chief analysts Jim Martens presented the following chart of the EURUSD. On it, Jim identified a complete five-wave move up from the March 2020 low. This is the textbook structure of an Elliott wave impulse, and it signaled to Jim and subscribers that a new trend was set to begin -- down. In Jim's words:

"EURUSD is in the midst of establishing a significant top. From 1.2349 and against 1.2284 the Euro should continue to weaken. A break of 1.2191 will bolster the new bearish outlook.

"The decline is in its infancy, and it has a long, long way to go."

Jim also presented the chart below of EURUSD prices versus the market's daily sentiment index. This chart showed that investor psychology had reached a new, bullish extreme, indicating an uptrend ripe for a reversal.

From there, EURUSD indeed took to the downside, fulfilling Jim's forecast for a "long, long" decline as the currency clocked four straight months of selling.

As for where EURUSD is headed next -- right now our Currency Pro Service reveals the exact price levels needed to confirm that "a bottom of significance" is in place.