EURUSD’s Chart Was Heavy Ahead of FOMC

eurusd elliott wave analysis september 18

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.

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery