EURUSD was near 1.1300 at the end of July on bets made that the Fed will soon announce a pause, and the ECB must continue to hike. Today, let’s fast-forward. This is the eleventh time in a row that the pair have been eliminated Now, it is trading under 1.0500. Although the Fed skipped a rate hike in September, it still maintains its hawkish tone. The ECB said it was done tightening its monetary policy after its 10th consecutive interest rate increase.
What should be immediately obvious is that none of the central banks’ decisions were as expected. It was impossible to predict what exactly Christine Lagarde and Jay Powell would do. How did you manage to avoid the crash in EURUSD we experienced during the past two-months? It has nothing to with interest rates. The patterns that the market had created were all it took. Let’s take a look.
The chart above was first introduced as an alternative to our Elliott Wave Pro Analysis for July 24, 2018. According to this count, the recovery from 0.9536 to 1.1033 was a five-wave impulse, labeled (i)-(ii)-(iii)-(iv)-(v). Wave (ii), a running-flat correction, was also visible. According to Elliott Wave theory, A three-wave correction is always followed by every impulse.