Tuesday, November 3, 2009

EURUSD—Euro EW Update

Here’s an Elliott Wave (EW) analysis of the Euro since I usually do these on Tuesday.

For the last two weeks I’ve suggested an ending diagonal was forming on the Euro daily chart. Its correction in the latter part of last week certainly seems to bear this out. Prechter and Frost write in their book, Elliott Wave Principle, that an “ending diagonal occurs primarily in the fifth wave position at times when the preceding move has gone ‘too far too fast,’ as Elliott put it.” On the daily chart below you see the ending diagonal traced out in blue.

If my overall interpretation is correct—that this is a zigzag correction from the primary wave down that ended last fall—then the Euro has been in wave C of that zigzag. Of course as with any discussion of Elliott Wave, five people results in six opinions. It conforms to the rules of a zigzag which are:

1) It subdivides into three waves
2) Wave A always an impulse or leading diagonal
3) Wave B always subdivides into a zigzag, flat, triangle, or combination thereof (in other words, just about any old type of correction, right?)
4) Wave B never moves beyond the start of wave A
5) Wave C always subdivides into an impulse or diagonal

Since it has dropped below the lower boundary of the ending diagonal, a correction is possible back to the start of the ending diagonal which is 1.4510/60. This is also polarity and an uptrend line comes in around this point. It would be worth looking at as a buy if it gets there depending on what else is going on with the charts. Here’s the weekly chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.

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