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US Dollar Trying to Shake the Bears But Patterns Point to EURUSD Rally

US Dollar Trying to Shake the Bears But Patterns Point to EURUSD Rally

Jeremy Wagner, CEWA-M, Head of Education

Using Elliott Wave Theory our analysis for EURUSD and US Dollar Index points towards shorter-term USD weak moves to retrace a portion of the 2018 USD rally.

The video above is a recording of a US Opening Bell webinar from July 2, 2018. We focused on the Elliott Wave pattern for EURUSD among other US Dollar pairs. According to Elliott Wave Theory, US Dollar may experience a correction in the next few days.

EURUSD Elliott Wave Chart Hints at a small relief rally

The EURUSD price chart shows higher lows and lower highs over the past week. This essentially paints a consolidation picture for traders. Trends and consolidations of those trends do not last forever.

On a shorter-term basis, the EURUSD Elliott Wave pattern hints we may see a bump higher into the 1.17-1.18 handle. This forecast is valid so long as EURUSD price remains above 1.1528, the June 28 low. Though unexpected, if EURUSD drops below 1.1528, then we consider the near term bullish pattern negated and the potential for further losses to below 1.14.

We have been short EURUSD with our first short entry at 1.2350 and our 2nd short entry at 1.2153 as prices hit our first target of 1.1554 on May 29. The Elliott Wave patterns still point towards lower levels over the medium term though several short-term patterns hint at a bump higher to possibly 1.18.

EURUSD price chart with Elliott Wave labels forecasting a near term up trend.

US Dollar Index in a mature up trend according to Elliott Wave Theory

The Elliott Wave chart for US Dollar Index points to a mature up trend since the February 2018 low. Therefore, we would not be surprised to see a softening of the US Dollar a little. Even traditional technical analysis supports this view as prices have risen to a weekly parallel price channel, which the market has respected numerous times in the past 3 years.

US Dollar Index price chart with Elliott Wave labels forecasting a longer term down trend.

The Elliott Wave pattern for AUDUSD hints towards higher prices

The Elliott Wave chart for AUDUSD has carved the minimum waves for a bearish impulse. Therefore, the odds are shifting towards a relief rally to correct a portion of this five month down trend. If this Elliott Wave labeling is correct, we can anticipate a rally that may reach .7650 and possibly as high as .7800.

This market’s trend has shifted to the downside in the medium term. Therefore, do not fight the trend and look for higher levels to initiate the short positions.

AUDUSD chart with Elliott Wave labels forecasting a correction higher.

Elliott Wave Theory FAQs

What are Elliott Wave impulse waves?

According to Elliott Wave Theory, the market moves five waves in the direction of the near term trend followed by a three wave counter trend wave. An impulse wave is one of two types of motive waves that denotes trend direction. Therefore, if we see a bearish impulse waveform, then after a three-wave counter trend wave, we can anticipate at least one more bearish motive wave.

If you are seeking further study into Elliott Wave Theory, read about our expert tips in our beginners and advanced trading guides.

After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.

What is the biggest mistake traders make?

Regardless of the style of analysis, many traders do lose money because they do not take the time to study the market and the effect of leverage. At DailyFX, we have studied millions of live trades and boiled our study down into a Traits of Successful Traders guide. You will find how leverage and human nature affects our trading so you can be better prepared for the next correction.

Elliott Wave Theory can be applied to a variety of highly liquid markets. FX is one of my favorite markets to apply the Elliott Wave principle. Learn more about trading FX with this guide specifically designed for you.

You might also be interested in…

What is an Elliott Wave impulse wave and how do you trade it?

Forex Education : How do you begin counting Elliott Waves?

---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.

Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.

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

Follow me on Twitter at @JWagnerFXTrader .

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

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