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:

Elliott Wave Correction Approaching in EURJPY

What will EURUSD, USDJPY and USDCAD bring next week? That is the subject of discussion in our next premium analyses due out late Sunday! The euro has been declining against its Japanese counterpart for years. Most recently, it fell to 114.43 on May 6th. However, a recovery has been in progress for the past three…

Read More »

EURGBP Pattern Signals Bullish Reversal Ahead

EURGBP has been in free fall since March 19th, when it rose to 0.9500. A month and a half later now, the pair is hovering below 0.8730, down 8% from the peak. Is the downtrend going to continue or should we expect a change of direction? That is the question we hope to answer in…

Read More »

GBPUSD Aiming at 1.30, but May Tumble to 1.21 First

Not long ago, we shared our long-term view of GBPUSD. In our opinion, the down-phase of the pair’s cycle, which is in its 13th year now, is almost over. One last dip to 1.1000 is likely to be followed by a major bearish reversal and the start of the next up-phase. Now, we are going…

Read More »

British Pound ‘s 13-Year Downtrend Almost Over

The thirteen-year period between 2007 and 2020 started with the biggest crisis since the Great Depression and is about to end with the biggest crisis since the Great Depression. Between the two, the longest economic expansion on record took place. And while stock markets around the world reflected that recovery, some currencies have been in…

Read More »

Ahead of the Move: EURUSD Adds 500 Pips in a Week

At the start of last week EURUSD was trading below 1.0700. The pair had fallen from as high as 1.1496 in just two weeks as coronavirus cases in Western Europe kept climbing disturbingly fast. And while fundamental traders had every reason to expect more weakness, the charts were sending a different message. The Elliott Wave…

Read More »

GBPUSD Completes Pattern, Uptrend to Resume

When we last wrote about GBPUSD Britain was still an EU member. Today, that is no longer the case as the country left the Union on January 31st. On the other hand, the pair is roughly unchanged, currently hovering around 1.2900. In fact, GBPUSD has been tracking a classic Elliott Wave pattern. Take a look…

Read More »

GBPUSD To Resume Uptrend Once Correction Ends

The Brexit saga continues as Boris Johnson’s re-election puts Britain firmly on the path of leaving the EU on January 31st 2020. And while the results of the June 2016 referendum caused a crash to 1.1650 by October 2016, GBPUSD is trading near 1.3100 today. The chart below reveals the structure of the recent recovery…

Read More »

More analyses