Late last week — and then again on Monday — EURUSD, the world’s most traded forex pair, fell sharply. In fact, the euro lost almost 200 pips, or two cents, against the buck.
Here’s a chart of that decline, copied from our Currency Pro Service (partial Elliott wave labels shown):
Our Currency Pro Service editor, Jim Martens, just posted a new video for FreeWeek participants where he explained why he’s bullish on the USD. So this reversal certainly fits the “big picture.”
However, forex markets rarely move in a straight line. Even if the euro top is in, temporary rallies are inevitable.
Indeed, on Tuesday morning, EURUSD rebounded — but the recovery stalled after retracing a Fibonacci 38.2% of the prior decline and within the area of the fourth wave of one lesser degree. Again, this Currency Pro Service chart illustrates this attampted rally for you:
The fourth wave of lesser degree often acts as resistance — and appears to have done so in this instance.
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This article was syndicated by Elliott Wave International and was originally published under the headline Did USD Just Bottom? Did EUR Just Top?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.