close icon

EURUSD’s Chart Was Heavy Ahead of FOMC

The Federal Reserve announced yesterday it is keeping the interest rate unchanged, a move that was largely anticipated. However, 2017 is still expected to see another rate hike with three more coming in 2018. Following the news, the dollar strengthened against its major rivals. The EURUSD pair crashed from above 1.2030 to 1.1860 in less than an hour.

Two questions arise. First, if the Fed’s decision was not a surprise, why did Forex traders buy the Euro ahead of the announcement and why was the following crash so severe? Second, and most important, could the market’s reaction to the news be predicted? Only the Elliott Wave Principle can helps us find the answers. Before the market opened on Monday, September 18th, we sent our clients the chart below.(some marks have been removed for this article)
eurusd elliott wave analysis september 18
Since the EURUSD was struggling to find direction, stuck between 1.2090 and 1.1820, we thought a consolidation was taking place. In the Elliott Wave world, consolidations usually take the shape of a triangle, so we assumed one was in progress. Triangles consist of five sub-waves, labeled (a)-(b)-(c)-(d)-(e) here. As visible, wave (d) up was still under construction and wave (e) down was supposed to come next. Therefore, the Wave principle suggested we should get ready for more upside in wave “c” of (d) first. By the time we had to send clients the Wednesday updates, the 30-minute chart of EURUSD looked like this.

eurusd elliott wave analysis september 20

Several hours before the FOMC decision, wave “c” of (d) had managed to lift the pair above 1.2000. The bulls’ problem was that it took the shape of an ending diagonal, which is usually followed by a “swift and sharp” reversal. Just in time for wave (e) of the pattern. So, traders bought the euro, because wave “c” of (d) was missing, but then sold it, because wave (e) had to occur. That is the answer to the first question. Today is Thursday, and here is an up to date chart of EURUSD.

eurusd elliott wave analysis september 21

The answer to the second question is that EURUSD’s behavior could be predicted by keeping an Elliott Wave perspective on the situation. Recognizing the larger pattern early on helped us recognize the smaller patterns it was made of in the process. In the end, it made all the difference.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Japanese Yen Refuses to be the Dollar’s Latest Victim

Last week, when most major currencies like the euro, the Canadian dollar and the British pound (not to mention the Turkish lira) fell against the U.S. dollar, one currency managed not only to hold its ground, but to actually gain some against the greenback. The Japanese yen ‘s rise dragged the USDJPY pair down to…

Read More »

Two Months Ahead of EURUSD ‘s Turkey-Driven Selloff

EURUSD’s selloff has resumed. The pair fell to as low as 1.1432 earlier today, following a Financial Times report stating the European Central Bank is concerned about some European banks’ exposure to Turkey’s currency crisis. Spain’s BBVA, Italy’s Unicredit, and France’s BNP Paribas were among the big names mentioned in the report. Now, let’s see how…

Read More »

AUDNZD Gains 500 Pips After Fibonacci Encounter

AUDNZD shot up sharply today, following a statement from the Reserve Bank of New Zealand that cemented the country’s interest rate at its current level for the foreseeable future. The pair was trading below the 1.1000 mark before the announcement, but rose to 1.1175 shortly after it. However, if you have been following our publications…

Read More »

GBPJPY Bears Remove a Major Hurdle

It has been less than 20 days since our last update on GBPJPY. On July 20th we shared our view that the pair is “looking into the hard Brexit abyss” and while the pair was trading around 146.20, we concluded that much lower levels should be expected. Of course, the bearish outlook was not based…

Read More »

USDCAD Down After a Tricky Elliott Wave Pattern

USDCAD climbed to 1.3290 on July 19th, but instead of lifting the pair even higher, the bulls lost momentum. A bearish reversal followed as a result. By July 25th, when we had to send our next update to subscribers, USDCAD was down to 1.3135. Was it a buy-the-dip opportunity or the beginning of a bigger…

Read More »

USDMXN Set to Recover, but Remains Vulnerable

It has been a painful month and a half for USDMXN bulls. The pair was almost touching the 21.00 mark on June 15th, when the bears returned with a vengeance to drag it to as low as 18.58 for an 11.3% plunge by July 26th. Some explain the strength of the Mexican Peso with the…

Read More »

New Forex Regulations in the European Union!

Forex regulations are about to change on the 1st of August for all traders in the EU. What’s happening? The European Securities and Markets Authority will force brokers to lower the leverage they offer on the four major currency pairs – EUR/USD, USD/JPY, GBP/USD and USD/CHF to 30:1. Minor pairs will see an even larger…

Read More »

More analyses