TECHNICAL ANALYSIS
Let’s start by stating what’s obvious with a simple glance of a price chart. Every major currency outside of the U.S. Dollar has been moving lower since at least 2011. Conversely, the U.S. Dollar has been moving higher since 2011. So our goal is to use Elliott to determine if these trends are likely to continue, or if an important reversal is brewing that will allow us to get in on the ground floor of the next big move.
What this article is NOT is an Elliott Wave tutorial. It’s easy enough to get ahold of one if you want one . But for the sake of getting to what you want to know, it’s important to understand the two main rules that make up the basis for Elliott Wave. One, trends play out in five moves (and will be labeled 1 through 5 on the charts below). Two, countertrend moves play out in three moves (and will be labeled with A, B, and C on the charts below). Tere is some serious science behind why this is, and aſter using this method to trade for the past 15 years, I assure you it works. But again, you’re not here for the tutorial or the origin story; we’ll stay focused on what it means for the currencies.
Oh, and one ground rule; I’ll use each currency’s most popular ETF for our analysis because they provide the easiest/most accessible way to trade them. Alright, that’s the context; here is our forecast of every major currency:
Australian Dollar (ETF: FXA)
FX
more purpose over the prior three years. Tis declining action is a countertrend move, and it may very well have ended at the 2016 low. Te early 2016 up leg was the biggest up move the Australian Dollar has seen in nearly 4.5 years, and it looks like a harbinger of what’s to come. Solid proof that a larger advance began in early 2016 would come with a move above the current 2016 high. A new high could be used as an excuse to buy the Australian Dollar at what the Elliott Wave pattern tells us could be the precipice of a new uptrend.
British Pound (ETF: FXB)
Outlook: Bearish
Te British Pound has been on the decline since late 2007. From 2009 to 2014, it made a half-hearted attempt to stop the bleeding, but that recovery proved to be a very large countertrend move. Over the past two and a half years, FXB has resumed its downtrend, and that downtrend is not over. It would be surprising if FXB recorded any type of important low in 2017. Te trendy down leg that began in 2014 is far from over, with FXB (Te most-prominent British Pound ETF) projecting down towards 100 before it is all said and done. Te Elliott Wave pattern is very clear here, and it’s bearish.
Canadian Dollar (ETF: FXC) Outlook: Bullish
Te Australian Dollar (as represented by its highest volume ETF, FXA) was in an impressive uptrend from late 2008 into its 2011 high. But aſter doubling its value, it lost its mojo, first trading sideways for a couple years before declining with
FX TRADER MAGAZINE January - March 2017 21
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