The Forex market was very interesting to observe last week. Major news like the Non-Farm Payrolls report in the U.S., the new trade deal between the USA, Canada and Mexico, and Bank of Japan’s determination to keep fighting deflation all contributed to an eventful five days in the world’s largest market.
News and events is what most Forex traders pay most attention to, so it is no surprise that there was a reaction in EURUSD, USDCAD and USDJPY. EURUSD, which has been in a selloff from 1.1815, fell to 1.1463 on Thursday before recovering to 1.1550 on Friday.
USDCAD, whose pullback started from 1.3386 on June 27th, touched 1.2783 on Monday, but then recovered to close the weekly session at 1.2940. And USDJPY, which has been steadily advancing since 110.38 on September 7th, climbed to a new 2018 high of 114.55 on Thursday, but then lost steam and closed at 113.72 Friday.
To sum things up, it was a week of reversals in the Forex market. The problem is that many would explain the change in the direction of the trends with the NFP, the USMCA and the BOJ. The truth is, the Elliott Wave Principle managed to put us ahead of all three trend reversals in the Forex market last week without the need of following what was going on on the political and economic stages.
The chart above was sent to our subscribers before the market open on Monday, October 1st. It revealed that USDCAD’s decline from 1.3386 looked like a W-X-Y double zigzag correct, developing between the parallel lines of a corrective channel. The lower line of the channel was expected to cause a bullish reversal, once wave (c) of Y reaches a new low. The updated chart below shows what happened next.
Wave (c) of Y slightly breached the lower line of the channel, only to lure the bears into falsely believe they were in control. The bulls returned shortly after to lift the pair by 172 pips to as high as 1.2955.
The next chart depicts EURUSD as of Wednesday, October 3rd, when it was sent to our subscribers as a mid-week update. The pair was hovering around 1.1570, following a recover from 1.1505. However, the Wave principle warned that the selloff was not over yet. Wave “v” was still missing and the 1.1500 mark was likely going to be breached before the bulls return.
The pattern we thought was developing fit in the position of wave c) of a larger corrective pattern. Except in triangles, C-waves are always impulsive, so it made sense to expect one last low in wave “v” before the trend changes direction. By the end of the week EURUSD looked like this:
The bears took the wheel right away and dragged the pair to 1.1463 in wave “v”. Unfortunately for them, fifth waves are always followed by a reversal. In that case, a recovery of almost 90 pips followed.
USDJPY is the third of three Forex pairs included in our premium packages and the third to make a sharp U-turn last week. We sent the chart below to subscribers on Wednesday, while the pair was at 113.85 and still in an uptrend. The Elliott Wave principle indicated the bulls were living on borrowed time.
We thought USDJPY is in the final stages of wave “c” within a larger a-b-c simple zigzag. Wave “a” was a textbook impulse pattern from 109.77 to 111.83, followed by a three-wave correction in wave “b”. Wave “c” has been developing for quite a while, but the fact that its wave “v” was missing suggested the bulls were strong enough for one last push before giving up.
That last push saw USDJPY climbing to 114.55 – a new record high for 2018. There was no time for celebrations though, because every impulse is followed by a correction in the opposite direction. Here, once wave “c” ended, it was time for a pullback of almost 100 pips.
The old saying that the trend is your friend must have put a lot of traders in trouble last week as some of the most followed pairs in the Forex market changed direction. If somehow you managed to stay ahead of the reversals in EURUSD, USDJPY and USDCAD by interpreting the news, good for you, but we prefer Elliott Wave analysis.
What will EURUSD, USDCAD and USDJPY bring next week? That is the subject of discussion in our next premium analyses due out later TODAY!