What will EURUSD bring next week? That is the subject of discussion in our next premium analysis due out late Sunday!
EURUSD is trading at levels last seen in April 2018, when it was on its way down to 1.0636 by March 2020. The pair is now approaching 1.2200, up 14.5% since the COVID-19 selloff nine months ago.
But trends don’t move in a straight line. Two months ago, we showed you how Elliott Wave analysis prepared us for the decline that occurred in September. Now, let us examine what happened next on the chart below, sent to our subscribers on October 28th.
Back then, we thought the September weakness stood for wave 4 within a larger five-wave impulse pattern. It logically followed that more strength in wave 5 can be expected. However, as October was drawing to a close, it became evident that wave 4 was not over yet.
Applying Warren Buffett Wisdom to EURUSD Trading
So instead of expecting a rally right away, we assumed wave 4 was going to evolve into a w-x-y double zigzag correction. This meant a new drop in wave ‘y’ of 4 should first occur before the uptrend can resume in wave 5. The anticipated bullish reversal was supposed to happen near the 38.2% Fibonacci support level, where fourth waves often end. Over a month ago now, the updated chart of EURUSD below shows how things went.
We find the very idea that one can predict exact tops and bottoms in the market extremely naive. It has more to do with wishful thinking than actual analysis. That is why we’d rather work with approximations and reversal areas than precise price levels. The latter create the illusion of knowledge, but can never achieve the real thing. To quote the great Warren Buffett, it’s better to be approximately right than precisely wrong.
And indeed, EURUSD ‘s wave 4 ended slightly above the 38.2% Fibonacci level. Wave ‘y’ had barely breached the bottom of wave ‘w’, when the bulls decided they’ve had enough. They took the wheel from 1.1603 on November 3rd and lifted the pair by over 570 pips in the next 30 days. Fifth waves reach a new high in 99% of the cases. With that in mind, one didn’t need to be very precise to catch a good chunk of that move.
What will EURUSD bring next week? That is the subject of discussion in our next premium analysis due out late Sunday!
