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TECHNICAL ANALYSIS

Using Elliott Wave to Uncover the Currency Market’s Best Opportunities for 2017

Using, Elliott Wave, Uncover, Currency Market’s, Best Opportunities, 2017, Technical Analysis, fx trader, forex

The currency market – and more importantly, the process of making money in the currency market – is a game of trends. As a trader, you’re either trying to make money on the continuation of a current trend, or you’re banking on the current trend ending and a new trend emerging. Either way, everything boils down to the trend and whether you’re swimming with it or fighting against it.

I’ve spent the last 20 years testing the different methods that can be used to identify and even predict trends so that I’m consistently swimming with it. One method stands above the rest, and it’s not even close. The Elliott Wave theory is a beast, not only at determining the difference between trendy and non-trendy price movement, but also providing valuable insight into when a trend is going to change. We can use Elliott to analyze the trends of every major currency to determine whether they represent good investment opportunities as we head into 2017. 

Let’s start by stating what’s obvious with a simple glance of a price chart. Every major currency outside of the U.S. Dollar has been moving lower since at least 2011. Conversely, the U.S. Dollar has been moving higher since 2011. So our goal is to use Elliott to determine if these trends are likely to continue, or if an important reversal is brewing that will allow us to get in on the ground floor of the next big move.

What this article is NOT is an Elliott Wave tutorial. It’s easy enough to get ahold of one if you want one . But for the sake of getting to what you want to know, it’s important to understand the two main rules that make up the basis for Elliott Wave. One, trends play out in five moves (and will be labeled 1 through 5 on the charts below). Two, countertrend moves play out in three moves (and will be labeled with A, B, and C on the charts below). There is some serious science behind why this is, and after using this method to trade for the past 15 years, I assure you it works. But again, you’re not here for the tutorial or the origin story; we’ll stay focused on what it means for the currencies.   

Oh, and one ground rule; I’ll use each currency’s most popular ETF for our analysis because they provide the easiest/most accessible way to trade them. Alright, that’s the context; here is our forecast of every major currency:

Australian Dollar (ETF: FXA)

Using, Elliott Wave, Uncover, Currency Market’s, Best Opportunities, 2017, Technical Analysis, fx trader, forex Australian dollar, AUD, chart 1

Outlook: Bullish

The Australian Dollar (as represented by its highest volume ETF, FXA) was in an impressive uptrend from late 2008 into its 2011 high. But after doubling its value, it lost its mojo, first trading sideways for a couple years before declining with more purpose over the prior three years. This declining action is a countertrend move, and it may very well have ended at the 2016 low. The early 2016 up leg was the biggest up move the Australian Dollar has seen in nearly 4.5 years, and it looks like a harbinger of what’s to come. Solid proof that a larger advance began in early 2016 would come with a move above the current 2016 high. A new high could be used as an excuse to buy the Australian Dollar at what the Elliott Wave pattern tells us could be the precipice of a new uptrend.

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