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US Dollar and EURUSD in a Terminal Wave?

US Dollar and EURUSD in a Terminal Wave?

Jeremy Wagner, CEWA-M, Head of Education

Using Elliott Wave Theory our analysis for US Dollar Index and EURUSD hints we are nearing the final sub-waves of near term USD strength. Then, we will consider a multi-month US Dollar correction to begin.

The video above is a recording of a US Opening Bell webinar from August 6, 2018. We focused on the Elliott Wave pattern for US Dollar Index and EURUSD among other US Dollar pairs. According to Elliott Wave Theory, US Dollar may be near a multi-month top.

US Dollar Index Elliott Wave Analysis

US Dollar Index has tagged the 10-year parallel line once again. This is the fourth time since June DXY has tested this line. Each previous test resulted in a rejection. We believe this recent test of the 10-year trend line has the potential to reject prices back to 93.

US Dollar Index chart with Elliott Wave labels and 10 year parallel trend line.

The current Elliott Wave we are tracking in US Dollar Index is that we are in an ending diagonal pattern. In fact, we believe we could be in the final wave of the ending diagonal pattern, which is why we believe this rejection of the 10-year trend line may push harder to the downside.

The ending diagonal pattern is valid so long as DXY remains below 96.03. A move, if even temporary, above 96.03 occurs, then the ending diagonal pattern is no longer valid and implies some other pattern is at play.

DXY chart showing elliott wave ending diagonal pattern and potential reversal.

EURUSD Elliott Wave Chart Illustrates a Mature impulse wave

Inspecting the EURUSD chart, we see prices have been falling hard for the past week. This was anticipated from our previous webinar as the odds are high the Elliott Wave triangle pattern terminated on July 31. This means EURUSD is progressing lower in a 5th and final wave of the impulse wave sequence. The first target is the recent swing low near 1.1508. Additional targets based on wave relationships appear down near 1.1350 and 1.1100.

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.

EURUSD chart with elliott wave labels showing price nearing the end of the bearish impulse wave.

Other recent current analysis articles using Elliott Wave Theory…

AUDUSD Elliott Wave forecasts a bounce towards 76 to 78 cents

Elliott Wave analysis for copper prices suggests weakness may be temporary

Elliott Wave Theory FAQs

What is an Elliott Wave ending diagonal pattern?

According to Elliott Wave Theory, there are several patterns to watch for. The diagonal pattern is a motive wave and carves in five waves. Each of the five waves are zigzags. Most of the time diagonals form in the 5th wave of an impulse of the ‘C’ wave of a zigzag or flat pattern. However, diagonals can form in the 1st wave or A position too.

We talk more about the construction and how to trade Elliott Wave diagonals in this hour-long recording.

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

When do I start counting Elliott Wave?

This is a common question of newer traders to Elliott Wave Theory. There are a couple of patterns I look for when starting my analysis. The Elliott Wave triangle pattern is one of those starting points because triangle form at certain spots within the Elliott Wave count. Therefore, if a triangle has been properly identified, we can then narrow the possibilities of the Elliott Wave count to begin to formulate higher probability patterns.

Learn more with “Forex Education : How do you begin counting Elliott Waves?

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

---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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