The bid to the USD means trouble for risk even as equities hold big gains from Asia and Europe follo...
Be Ready for Major Euro Event
10/10/2011 3:40 pm EST
Elliott Wave analyst Jim Martens expects the EUR/USD to continue lower and break out of its consolidation range, and traders should look for a key signal and act, if they haven’t already.
Well if traders are watching the US dollar most importantly, probably the second most important is the euro and what it’s doing.
Our guest today is Jim Martens to talk about that. Jim, what is the euro doing right now, and what do you expect it to do here at the end of 2011, maybe into 2012?
Well recently, the past six months, it’s been consolidating, so it’s hard to say. It’s been whipsawing people on both sides. We think it’s going to fall out of that consolidation, probably heading down towards the lows of last year near 1.18 and eventually through it, closer to parity.
So when you’re counting Elliott Waves on the euro, you’re looking mainly at the daily chart?
In that case, yes, because the consolidation is so long lasting, now we’re looking for evidence that it’s breaking below trend lines and prior lows that will signal that the thrust from the triangle is underway.
I know Elliott Wave works really well when things are trending. What if something is in a range and is consolidating and there is not a lot of movement there? Can you still count Elliott Waves?
Definitely. It can be trying, as it can be with any method, but what the Elliott Wave principle does is show you key levels that if it doesn’t exceed those, then I really have little reason to doubt my outlook on the market.
So you have to be steadfast, believe in what you’re doing, and stick to it. We did that for about six months, and recently, it’s starting to pay off.
What do you recommend in terms of trading that? Do you like the spot forex market, futures, or ETFs?
I like just being in the spot market myself; it’s just the easiest to deal with, the cleanest on the charts as far as I’m concerned.
In terms of the set-up, though, what we’re going to be looking for is as we look for on any basic Elliott Wave pattern, a five-wave decline by the euro followed by a three-wave recovery to a lower high will be the signal that it’s time to take action, if they haven’t already.
On the US dollar, a lot of people look at the Fed and watch that kind of news. What should I be watching outside of the charts, if anything, on the euro?
I pretty much dismiss all of that. I look at the charts; everything is baked into the charts.
If you look at an FOMC announcement, the market reacts to the charts, but many times, and recently, in fact, we saw a case where the Elliott Wave pattern was completing right before an announcement was made.
They made their announcement, the market reacted, quickly reversed course and went the way that the wave principle suggested it should.
We really think markets are driven by crowd psychology. The Fed is reacting to that psychology many times, so we’re kind of a step in front of that.
Finally, does Elliott Wave tell you anything about size or positioning? Is there an Elliott Wave that says to put more on this trade because it looks really good versus another wave count?
There are points within it that we gain confidence, which means you might act a little bigger than you might ordinarily. You might add to an account.
In the end, it all comes down to risk management. Regardless of any method you use, risk management is key, and the same is true with the Elliott Wave principle.
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