In the beginning of February, we posted a forecast of EUR/AUD, called “EUR/AUD Ready For Another Sell-Off”. In that material we applied the Elliott Wave Principle to the 4-hour chart of the Euro against the Australian dollar. This led us to the conclusion, that we should expect a large decline of roughly 1600 pips. The chart below will show you how the analysis looked like more than a month ago, when EUR/AUD was trading around 1.48.
As visible, we had a perfectly looking 5-3 pattern. According to the theory, the exchange rate was supposed to go in the direction of the five-wave sequence. That is the reason why we were highly bearish about this pair. In addition, the 61.8% Fibonacci level was expected to serve as a resistance, which supported the idea as well. The anticipated 1600-pip decline is not done yet. However, EURAUD did fall by more than 1000 pips already. Yesterday it touched 1.3750, so now seems to be a good time for an update.
It appears wave (C) is currently developing. It still has a couple of fourth and fifth waves left to make, so the bears remain in the driving seat. This situation is a good of the Wave Principle’s ability to predict large movements. But there was a moment, which could have been confusing. Wave C of (B) is a perfect five-wave impulse. If you were to look only at it and ignore the bigger picture, you would have come to a totally different forecast. That is why it is extremely important to know where to start you Elliott Wave count from.