Or why having an Elliott Wave guide at hand is better than guessing the news
GBPUSD has been moving sideways since the “Flash Crash” in early-October, 2016. During the next six months, the pound dollar pair has been locked in a contracting pattern even the novice technical analyst can recognize. We are talking about the triangle, which is used in both conventional technical analysis and Elliott Wave analysis. Of course there is a reason why we prefer the latter. Without Elliott, the analysts would have to wait until the entire pattern is completed, in order to make an forecast. Elliotticians, on the other hand, have the advantage of knowing where a particular pattern usually forms and expect it. That is what we did back on December 12th, 2016, when we sent the following chart of the pound dollar exchange rate to clients.(some marks have been removed for this article)
As visible, nearly four months ago, while 4 of the 5 waves of the pattern were still missing and GBPUSD was hovering around 1.2575, the multi-time-frame Elliott Wave interpretation of the pair’s behavior made us think it was likely going to form a triangle. Yes, it was too early to bet the house on it, but it does not hurt to have an idea, right? Furthermore, we needed that big picture outlook, in order to base short-term predictions on it. As the updated chart below shows, it all went well.
As expected, the top at 1.2774 in December, 2016, turned out to be the end of wave A. It was followed by a decline to 1.1987 in mid-January, 2017, for wave B. Wave C then traveled to 1.2706, where wave D down began. By mid-March, the pound had dropped to 1.2109 against the greenback, only to bounce back up in wave E, which seems to have ended at 1.2615. Of course, there was no way to predict these exact levels in our December 2016 forecast. Its only purpose was to serve as a road map and it did a good job, to say the least.
And one last thing. While the pound dollar rate was following the path of the waves, most Forex traders have been trying to decipher the pair’s reaction to all the Brexit talks that have been going on in the background. Elliott Wave analysts simply did not have to bother.
- Elliott Wave analysis allows you not only to recognize a pattern, but to predict its occurrence
- It allows you to make accurate forecasts sometimes months in advance
- You can stay ahead of the market’s reaction to Brexit talks