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The Latest "Mystery Move" in the Euro Explained

Elliott waves help you see structure where others see mystery

by Bob Stokes
Updated: January 03, 2017


[Editor's Note: The text version of the story is below.]

Financial market commentators almost always look for something in the news to explain why a financial market behaves as it does.

Indeed, sometimes the news does dovetail with a given day's trading action. Hence, many market participants conclude that this news, whatever it might be, caused the market to do what it did.

But, you probably have noticed that, fairly often, the news does not neatly tie-in with market moves, leaving mainstream market observers at a loss for an explanation.

But the fluctuations in financial markets do have an explanation. It's just that most participants aren't aware of it.

It's called the Elliott wave model.

Consider this chart [entire wave labeling available to subscribers] and commentary from our Dec. 30 Short Term Update:

The [Euro] surged to 1.0654 in overnight trading. Several financial stories were at a loss for the sharp rise. "No 'particular' news seems to be driving the euro's jump ," says the head of forex sales at an Asian bank. Bloomberg called the jump a "Mystery Move." We call it Minute wave c (circle) of Minor wave 2, which we forecast in these pages.

Indeed, the Dec. 28 Short Term Update said:

Wave c (circle) of 2 could carry prices to 1.0558-1.0619, a possible target range

As we've seen, the Dec. 30 surge higher took the euro's trading level to just north of the upper end of the target range.

Otherwise, the dollar has climbed about 4% against the euro in late 2016.

Our analysts have also kept subscribers ahead of key junctures in the U.S. Dollar Index. Our May 2016 Elliott Wave Financial Forecast said:

The U.S. Dollar Index spiked down to 91.919 on May 3, its lowest intraday level since January 2015; it then reversed to close up on the day. … This week’s low was not confirmed by the euro, which remains below 1.1712, its August 24 extreme. An inter-market divergence between the two currencies is common at trend reversals.

Bear in mind that sentiment toward the buck was highly pessimistic when we forecast this U.S. dollar trend reversal.

Just one day before the low, Bloomberg published this headline (May 2, 2016):

"Perilously close" to a bear market for the greenback, says [global strategist for a major European bank]

Even so, the dollar index's 91.919 low remained intact, and the buck went on to reach a 14-year high of 103.650 on Dec. 20.

It now appears that both the U.S. dollar and the euro are at another critical juncture.
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