When the market opened on Monday this week, EUR/USD was trading in the area of 1.1330, after s significant rally from 1.1045 just two weeks earlier. Most traders have heard that the trend is always more likely to continue. That is true except when it is not, as EUR/USD demonstrated. It is now evident that the pair is going to close the week around 1.12.
Instead of continuing higher, it fell sharply today, so blindly following the trend is not always the best decision. And before you blame the Fed’s chairwoman Janet Yellen for the sell-off, take a look at the chart below, which was sent to our premium clients before the markets opened on Monday, August 22nd. (some of the marks have been removed for this article)
As visible, five days ago we were expecting EUR/USD to start declining and eventually breach the lower line of the above-shown price channel, drawn through the bottoms at 1.0951 and 1.1045. Knowledge of the Elliott Wave Principle and a couple of charts was all that was needed to turn bearish on EUR/USD at the start of the week. Now, let’s see the same chart, updated.
The exchange rate began falling almost immediately. It was, however, moving slowly and choppy. So, something was needed to trigger the anticipated move. Janet Yellen’s Jackson Hole speech today did just that. See, it was not the reason for anything, because the market was already flashing bearish signals five days earlier. It was just the catalyst, which unleashed the plunge we have been waiting for.
The trend is always more likely to continue, except when it is not. The Wave Principle has the ability to help traders identify the point of reversal, before the speech-waiting majority has any idea. We hope you are not checking when the next “big announcement” is scheduled for.