The Euro's Slide to a 2-year Low: Elliott Waves In Motion

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The Euro's Slide to a 2-year Low: Elliott Waves In Motion
A lesson in how EWI's Elliott Wave Junctures used a Head and Shoulders chart pattern to spot a high-probability opportunity in the euro

By Nico Isaac
Mon, 30 Jul 2012 16:30:00 ET

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Below you see a daily price chart of EUR/USD, the euro/us dollar exchange rate and the most actively-traded currency pair in the forex markets -- as it stood in mid-April.

In mid-April, "X" marked the spot where the avatar "YOU" should have geared up for a high-probability bearish trading opportunity. The question is, would the analysis you use NOW have enabled you to accurately see that opportunity THEN?

Well, let's say you ascribe to the school of the "fundamental" analysis. On April 17, the euro's event du jour was the Group of 20's decision to increase the International Monetary Fund's resources. An April 17 BusinessWeek headline wrote, "Euro on track for best weekly gain since February on G20 pledge to counter the European debt crisis." So, "fundamental" analysis would have had you turn bullish the euro in mid-April.

Or maybe you, like many technical analysis traders, hang your hat on one specific indicator. On April 17, one news site chose the 200-hour Moving Average to inform its near-term euro bias and wrote: "Euro turns positive against the dollar with the single currency's failure to break below its 200-hour MA, a key support level." Again, you would decide the trend was up.

At that same time, in the April 18 video lesson of our Elliott Wave Junctures, EWI's senior analyst Jeffrey Kennedy presented the first part of a 2-part series to subscribers on how the Elliott Wave Principle neatly subsumed an old-school chart pattern -- the Head and Shoulders -- on the euro's price chart. Here is what Jeffrey's chart of the euro (compiled below) brought to light:

A long, clear trendline -- called the "neckline" -- which, if penetrated, would signal the start of a downtrend.
A probable level of price resistence for the right shoulder.
And, a high-probability price target for the anticipated decline -- via the Head and Shoulders "neckline measuring objective."

That was on April 18. On May 30, Elliott Wave Junctures showed you just how well the euro followed that April 18 Elliott wave forecast:

In his May 30 Elliott Wave Junctures video, Jeffrey also applied the same thrust measurement to a weekly price chart of the euro to suggest even "further declines for the months ahead."

Now that the single currency stands near its lowest level in 2 years, the question remains: Is the euro finally due for a rebound?

Well, in the July 20 Elliott Wave Junctures video (online now), you get a fresh, new perspective on the euro's coming trend. Subscribe risk-free today and watch the whole story within seconds.

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Tags: Elliott wave, elliott wave junctures, euro, head and shoulders pattern, Jeffrey Kennedy, trading lessons

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