Britain voted to leave the European Union, causing the dollar to skyrocket against all major currencies. One of Brexit’s victims in the forex market was EURUSD, which plummeted by more than 500 pips – from 1.1427 to 1.0911 – in less than 8 hours. To most people, Britain’s referendum results are quite shocking. We admit that Brexit came as a surprise to us as well. However, EURUSD’s reaction to it is all but shocking, because, by using the Elliott Wave Principle, we managed to prepare for what was coming.
On Monday, June 13th, which is more than ten days ago, we sent our premium clients the following 4-hour chart of EURUSD.
The chart speaks for itself, but let’s explain it anyway. As visible, there is a five-wave impulsive decline from 1.1616 to 1.1098, marked with a). According to the Elliott Wave principle, every impulse is followed by a three-wave correction in the opposite direction. By June 13th, this natural three-leg rally did not seem to be over, so we assumed waves “b” and “c” of b) need to develop, before the larger downtrend resumes in the face of wave c) to the south. In addition, 1.1616 has been identified as our invalidation level for this count, while targets below 1.1098 were plausible. And since the whole world already knows what happened to EURUSD after the referendum results, let’s just see an updated chart of the exchange rate.
As expected, wave “b” of b) declined a little more, but held above 1.1098. As expected, wave “c” of b) rose above the top of wave “a” of b) and terminated at 1.1427, where, by the way, the 61.8% Fibonacci level served as resistance. And, as expected, 1.1616 was never touched, so once wave b) was over, the entire 5-3 Elliott Wave cycle was also over and wave c) to the downside crushed the euro.
Most people would claim EURUSD plunged as a result of the Brexit. We prove it did so, because it follows the natural laws of the Elliott Wave principle. In this respect, Brexit might be the trigger, at best, but never the cause of the crash. So why looking for the cause post-factum anyway, when you can apply wave analysis and prepare before it is too late?
What to expect from now on? What is the bigger picture saying? Is EURUSD going to continue even lower or the support near 1.0910 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your Elliott Wave analysis due out every Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.
