EURUSD fell to new lows last week while silver and gold consolidated near their highs. These trends appear incomplete according to Elliott Wave Theory.
EURUSD Tests recent lows
During last week’s webinar, we highlighted the potential for EURUSD to work itself to a new low below 1.11 and possibly down to the 1.10 handle. Either one would clear the previous support formed in 2019. The price movement from last week did follow through to the downside. If a temporary bottom is formed, EURUSD may rally back up to 1.1200-1.1275. The Elliott wave patterns look incomplete to the downside so we are anticipating more pressure that may push EURUSD lower.
IG client sentiment is also supporting new lows as the current reading is +3.00. This means 75% of the traders are positioned long. We use IGCS as a contrarian indicator and this extreme long reading keeps us focused towards more losses in EURUSD.
A move above 1.1275 does not negate the potential for further losses. However, a break above 1.1412 will force us to rescind this bearish EURUSD forecast and consider other alternative patterns.
Silver price forecast points higher after correction
Last week, we focused on the silver price forecast using Elliott Wave Theory. Our silver price forecast currently remains in scope, which means we are anticipating continued gains so long as silver prices trade above $15.94.
Last week, silver prices reached up and found some resistance near the equal wave measurement from the November 2018 to February 2019 up trend. The structure of the advance leaves open the interpretation that silver prices may consolidate these recent advances in a minor wave 4. Most of this minor wave 4 is anticipated to hold above $15.94 which represents the 38% retracement of minor wave 3 (a common wave relationship). If $15.94 is materially broken, then we will be on alert that an alternative pattern has developed.
Therefore, we are considering the current Elliott wave of silver to be wave .4 of 3. A move below $15.94 does not eliminate higher pricing eventually, but merely opens the door for more bearish scenarios. Though not anticipated, should silver prices fall below $15.94, then we will consider those bearish options more heavily.
Gold prices stall near recent highs
Gold prices continue to trade near their highest levels since 2013. The uptrend from May has been significant and we can count this Elliott wave pattern as incomplete to the upside. A dip back towards $1340-$1400 would be viewed as a favorable development, especially if the waves lower are sloppy and overlapping. Sloppy and overlapping waves are indicative of corrective waves which then implies future up trend.
Should gold prices be supported, there is a grouping of wave relationships just below $1600 per ounce. A meaningful break above $1470 opens the door to consider $1600 as a viable target.
Therefore, we are considering the current Elliott wave of gold to be at the end of wave A of (Y)…both are bullish waves. We are anticipating wave B of (Y) to be a partial retracement lower followed by wave C of (Y) higher. This gold forecast remains valid so long as gold trades above $1266.
Elliott Wave Theory FAQ
How does Elliott Wave theory work?
Elliott Wave theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders analyze the waves for 5-wave moves and 3-wave corrections to determine where the market is at within the larger pattern. Additionally, the theory maintains three rules and several guidelines on the depth of the waves related to one another. Therefore, it is common to use Fibonacci with Elliott Wave analysis. We cover these topics in our beginners and advanced Elliott Wave trading guides.
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.
Join Jeremy in his live US Opening Bell webinar where these markets and more are discussed through Elliott wave theory.
Follow Jeremy on Twitter at @JWagnerFXTrader .