Thứ Tư, 20 tháng 6, 2012

Technical Analysis of US Dollar Index and EUR/USD

http://elliottanalysis.com/2012/06/19/technical-analysis-of-us-dollar-index-and-eurusd/,
une 19, 2012 in Currency, EUR/USD, USD by ShivakkumarVadiveyl

Technical Analysis of US Dollar Index and EUR/USD

This article presents the Technical Analysis of US Dollar Index and EUR/USD Pair.
The USD has enjoyed a good run up in recent months and many are starting to attribute it to the recovery of the US economy. The real fundamental reason for the rise in USD is due to its reputation as a safe haven currency. The Euro has come under tremendous pressure as the credibility of Euro is being questioned due to the debt crisis that has developed in the Eurozone countries. Naturally, in such situations, investors look for safe havens and the currency that stands out is the USD.
Let us analyse the US Dollar Index since the inception of Euro. As can be seen from the below 9-Day Chart of the USD, the USD has been on a steady decline since the inception of the EURO. This is a fundamental reason as the Eurozone started to trade in Euro rather than in US Dollar and hence, there is a lesser need for businesses to hold USD. Naturally, the USD was sold in exchange for the Euro which steered the Euro higher and USD lower.
USD Index 9-Day Chart
USD Index 9-Day Chart
The decline in USD was quite steady and we can label the Elliott Wave counts quite clearly in five impulsive wave down to 2005. From then on, the USD went on a sideways pattern which is encompassed in a contracting triangle. The contracting triangle is a continuation pattern which tells us that we are likely to see USD going further lower once the triangle is completed. I can’t present a bullish count as the upwards moves are corrective rather than impulsive. Based on the below chart, the Elliott Wave count for USD is that Primary wave [A] completed in five wave impulsive fashion and Primary wave [B] is either in progress or has completed. The next move of the Primary degree is expected to be Primary wave [C] to the downside. It would either be equal to the length of Primary [A] or 1.6 times Primary [A].
Let us now zoom in to the 2-Day chart of the USD. The chart starts from the top of the alternate Primary wave ;[B] of the 9-Day chart. The move down is most likely a w-x-y correction to complete Intermediate wave (D). The alternate count is that this is a five wave impulsive move to complete Intermediate wave (1).
USD Index 2-Day Chart
USD Index 2-Day Chart
The move up that transpired after that has been a choppy move with a lot of overlapping candlesticks. I’m of the view that this move up is a complex w-x-y to complete Intermediate wave E of Primary wave [B]. The alternate view is that this is a Intermediate wave (2).
Let us consider this move up independently with out including the previous moves. It is quite clearly a choppy corrective move with a lot of overlapping waves. We could however label it as a 1-2-i-ii formation which is a bullish case if we used some creative labelling which I am not in favour of as Minute wave [w] is not looking like an impulse. The best count is to label this as a w-x-y. This leads us to the next question of the target levels. Based on Elliott Wave Principle, the Y of w-x-y should have some Fibonacci relationship to W and is typically 1.6 times W. For the Minor waves (in amber) that gives us a target of 87.25. If we then use the same method for the Minute waves (in light blue), the possible target levels are 86.90 (123.6% of w) and 87.91 (138.2% of w). The target levels are clearly pointing to further upside.

EUR/USD Pair

Let us now consider the Daily Chart for the EUR/USD. The down move starts from the top of May 2011 which is encompassed in a channel. The EUR/USD chart looks very much like an inverted USD chart. The same w-x-y formation can also be clearly seen in this chart but in this chart, it is progressing towards the down side. The down moves are clearly stronger and the up wards moves have been much weaker. Using the similar Elliott Wave guideline, we find that the possible targets for this move is around 1.18 – 1.19 region and 1.12 – 1.13 region.
EURUSD Daily Chart
EURUSD Daily Chart
Finally, we present the hourly chart of the EUR/USD Pair. This chart is presented to find the possible move going forward for the near term as the previous charts are for the intermediate to longer term views. We zoom in to the region highlighted with the green line in the previous daily chart. As can be seen clearly, this move is a very choppy corrective move. It looks like wave (a) up, followed by wave (b) in a expanding triangle and wave (c) in a corrective upwards move. Pay attention to the price bars right after the completion of wave (c). It is a downwards move in an impulsive fashion which indicates that the pressure is towards downward direction. This means that the EUR/USD is going to head lower with the completion of this corrective wave.
EUR/USD Hourly Chart
EUR/USD Hourly Chart

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