Elliott Wave Webinar: USD Index May See One More Dip
The video above is a recording of a US Opening Bell webinar from February 12, 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, Dow Jones Industrial Average, Oil and Gold.
The US Dollar Index (DXY) is consolidating sideways in fourth wave of an Elliott Wave impulse wave. When wave (iv) finishes, that means we will anticipate a fifth and final wave to new lows. We believe this final move into new lows may set the stage for the largest US Dollar Index rally since January 2017.
Elliott Wave Chart for Dollar Index
Applying the Elliott Wave principle to the chart above, we can see a sideways consolidation in wave (iv) that is reaching levels where it may pivot lower in a fifth wave. Fifth wave measurements stretch down to 87.40 so we will look for signs of a reversal should DXY make it that low. Once the fifth wave is in place, we anticipate a rally back up towards 95-98 that reflects the largest rally since January 2017.
AUD/USD Elliott Wave Forecast is Longer-Term Bearish
It appears AUD/USD carved a meaningful high at the end of January 2018. We can count the upward wave that began 3 years as being complete. The current sell off has been deep enough to provide warning signals the up trend is over.
In the short term, AUD/USD may bounce higher back into the 79 cent handle. We will use the corrective bounce higher to establish short positions. If AUDUSD is successful in making it to 79 cents, then the longer-term forecast is for AUD/USD weakness to retest 69 cents.
AUDUSD sentiment is getting close to flipping net bullish. This would be the first flip in sentiment since early December 2017. According to our sentiment trading guide, we would use this as a contrarian signal with a bullish flip signaling a bearish trend.
EUR/USD Elliott Wave Analysis Shows Reversal Looming
EUR/USD has made little progress for the past couple days. According to Elliott Wave Theory, we do believe the next move is higher into a longer-term top. As a result, the better risk to reward ratio trade is wait to short at higher levels…possibly in the 1.26 handle where three degrees of ending waves meets a 10 year trend line.
EURUSD Sentiment Analysis
EURUSD continues to spark bullish signals through its sentiment reading. This reaffirms that we may see some more strength in EUR/USD prior to a meaningful reversal. The current live sentiment reading for EURUSD is -1.5. Sentiment is used best as a contrarian tool, which is a bullish signal for EURUSD now.
If wave (v) embarks higher, look for sentiment to shift towards bulls to help confirm the wave five top as sentiment is a contrarian tool. This bullish shift could be structured with bears giving up or the number of traders net-long increasing (or a combination of both).
Elliott Wave FAQs
How does Elliott Wave know the cycle is about to end?
Elliott Wave Theory is a study of wave patterns and their structure. Since we can nearly count a five-wave impulse as complete, that is warning us that a large rally is looming nearby. Therefore, we scale down to a smaller time frame and see that within the fifth wave, it is nearly complete in carving five waves. Since the market is fractal, we can keep zooming in and seeing these wave forms develop on smaller time scales. Continue your Elliott Wave education by reading our beginners and advanced Elliott Wave guides that will cover some of the basic patterns and how to trade with Elliott Wave Theory.
What markets is Elliott Wave Theory best applied to?
Elliott Wave Theory is best applied to the more liquid markets. Therefore, you will see me apply my analysis to major and common FX pairs, stock indices, common commodities like gold, silver, copper, and energy like oil or natural gas.
---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.
EURUSD and Gold were two markets covered in the December 27 webinar “What to Watch For in 2018”. Watch a recording by registering here.
Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.
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