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Elliott Wave Webinar: US Dollar Index Prepares For Counter Trend Rally

Elliott Wave Webinar: US Dollar Index Prepares For Counter Trend Rally

Jeremy Wagner, CEWA-M, Head of Education


What's on this page

US Dollar Index is nearing the end of an Elliott Wave impulse pattern. Dollar is approaching a support zone that may cause it to strengthen back towards 95 DXY and EUR/USD may drop towards 1.12.

The video above is a recording of a US Opening Bell webinar from January 22, 2018.

In today’s US Opening Bell webinar, we discussed key markets using Elliott Wave Theory such as (and not in this order) DXY, EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, Oil, and Gold.

The Elliott Wave chart for US Dollar Index (DXY) illustrates an important high occurred near 104 in December 2016. Since then, US Dollar has sold off hard and has nearly completed an Elliott Wave impulse pattern to the downside. This suggests the Dollar Index may find its footing soon and stage its largest rally in over a year back towards 95-98. According to the four-hour price chart below, wave (iv) and (v) are needed to finalize the near term down trend.

US Dollar Index Elliott Wave Chart

Elliott Wave analysis for US Dollar Index...the trend appears nearly complete to the downside with one more wave lower.

EUR/USD Elliott Wave Analysis

If Dollar Index may pivot towards strength soon, then that suggests EUR/USD may top and pivot lower in the coming days. The Elliott Wave analysis for EUR/USD shows that it is also looking for a wave (iv) and wave (v) to finish its up trend. Once final waves of (v) are in place, then we can count the whole pattern since March 2015 as an expanded flat Elliott Wave pattern. The next move is likely to be several hundred pips lower towards 1.10-1.12.

EUR/USD Elliott Wave analysis showing an incomplete wave pattern to the upside.  Once wave (v) ends, then there is an elevated risk of a strong reversal in EURUSD.

EURUSD Sentiment Analysis

Sentiment is also indicating some subtle shifts. The number of traders net short on EUR/USD has shifted lower despite the market driving higher by 200 pips. This indicates to me that short traders are giving up and beginning to shift towards long positions. Sentiment is a contrarian tool so that subtle shift can be a bearish signal if that trend continues.

Frequently Asked Questions

Which markets can Elliott Wave Theory be applied to when analyzing trade set-ups?

Elliott Wave Theory is a study of wave patterns and therefore needs to be applied to markets large enough that experience mass behavior. My favorite markets to apply the Elliott Wave principle to are the main forex markets as well as Gold, Oil, and Dow Jones Industrial Average. To get started read our beginners and advanced Elliott Wave guides that will cover some of the basic patterns and how to trade with Elliott Wave Theory.

I have traded shares before, but not forex…how do I get started?

You are in good company as I have followed that same path as you starting with shares and eventually trading in FX. I also know many other people who have followed a similar path. A good way to get started is to read our New to Forex guide. Then, as a follow up, it is important to understand the habits that make traders successful.

---Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

USD/JPY and as well as EUR/JPY, GBP/JPY, and AUD/JPY were markets discussed in Jeremy’s January 3 webinar forecasting 2018 trends. Watch a recording by registering here.

Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.

Follow me on Twitter at @JWagnerFXTrader .

To receive additional articles from Jeremy via email, join Jeremy’s distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.