Yen Short Term Strength, then 175.00

EURUSD The euro has bounced from support just above parity, although we think this bounce is corrective. Given the impulsive nature of the US equity rally, it seems that the policy divergence I’ve so often mocked, may actually prove to come to reality. Certainly, a couple of .25% rate hikes by summer may be the Yen Short Term Strength, then 175.00

Elliott Waves in 2017

EURUSD Our top two counts suggest the euro will visit parity against the dollar. First, there’s the top count which calls for an immediate collapse, likely having something to do with the banking system or breakup risk coming to the fore. Friday’s big topping tail suggests that prices will immediately head down, and potentially to Elliott Waves in 2017

Trump, the Dollar & Yen Crash

We’re only going to address the elephant in the room (Trump election) to remind readers that social mood governs markets, and its process is endogenous. Meaning social mood moves of its own volition; it is not controlled by politicians. Trump’s election will create certain winners and losers, but it will NOT CHANGE ANY UNDERLYING TRENDS. Trump, the Dollar & Yen Crash

Dollar Loses “Policy Divergence” Strength

EURUSD Last week’s blast higher puts our top count on the shelf for the moment. The sharp nature of the rally makes it look like wave (a) of 2. So, a down start to the week, followed by a push higher to test the broken trendline for wave 2 is our best count. The alternate Dollar Loses “Policy Divergence” Strength

Perfect Elliott Waves

While I believe that all markets trade in Elliott waves, sometimes the waves aren’t perfect. Sometimes wave 4 overlaps wave 1 by a few pips, and sometimes what looks like five down in an ever expanding market (like stocks which are measured in a depreciating currency) is actually a false break. Regardless of being a Perfect Elliott Waves

Entering Capital Preservation Mode

We’ve made the case for well over a year now that our “dollar strength” theme, is more like “other currency weakness” than any “policy divergence.” In other words, it’s the underlying weakness in European and Asian economies that are allowing their currencies to fall against the dollar; as oppossed to dollar strength coming from the Entering Capital Preservation Mode

EURUSD Out of the Triangle!

EURUSD Last week’s title was dead on, “Euro to Follow the Pound.” The breakdown from the triangle happened on Tuesday, and it was straight down from there, likely completing wave (i). A small bounce may develop in wave (ii), but remember what we cautioned several weeks ago. This triangle has been so long in development, EURUSD Out of the Triangle!

Euro’s Spring Compressed

EURUSD We remain on the side that this consolidation is corrective in nature, and that a collapse is coming. The European banking system is woefully under capitalized, and the bailout structures aren’t in place. We have little doubt that the ECB and Brussels will cobble a system together once it’s deemed necessary, but the problem Euro’s Spring Compressed

ECB, BoJ & Fed Tighten By Failing to Loosen Policy

We’ve all heard comments like, “Orange is the new black.” Well, in today’s upside-down world of monetary policy all three major central banks decided to not loosen policy further. Most market participants were disappointed, although it did spark some “risk-on” behavior. But, underneath the bullish action, some subtle deterioration in the “Central Banker Omnipotence” theme ECB, BoJ & Fed Tighten By Failing to Loosen Policy

Dollar Strength Doesn’t Mean Bullish Risk

EURUSD The bullish case for the euro has taken a turn. We’ve long been expecting this corrective rally to fail, and it seems the time may be upon us. After wave (E)’s false trendline break, a choppy decline ensued. But, the rally up from the 1.1123 low is a clear three wave move. As such, Dollar Strength Doesn’t Mean Bullish Risk

Euro Stronger, GBP & Down Under Not So

EURUSD The break of the 8/5 high left a clear three wave decline from the 8/2 high, and we think higher is still to come. In fact, we’ve altered our larger count, now suggesting that prices are in wave (E) of ((X)) up from the low. That means the near term down trendline may break, Euro Stronger, GBP & Down Under Not So

QE is Ambulance That Runs Over Patient

EURUSD Our working assumption is that the entire consolidation from the 2015 low is corrective to the upside. Additionally, we potentially have a 1, 2; (i), (ii) count from the May high. Certainly, if that count is correct the downside is substantial. When you add the near perfect 61.8% retracement of the wave 1 decline, QE is Ambulance That Runs Over Patient

Gassing Up the Helicopters

EURUSD Only brief comments tonight. EURUSD has run into resistance three times now post-Brexit. The sideways consolidation likely means continuation, which in this case is lower, and perhaps sharply so. A break of the up trendline cements Thursday’s high as critical resistance. Until then, further sideways action could develop. It would take a push above Gassing Up the Helicopters

Keeping It Simple with Elliott Waves

EURUSD Pretend for a moment you know nothing about the pair above, and instead focus on the lack of an impulsive advance from the December low, and the broken trendline off the low. Both of those would be bearish by themselves. Combine that with a retest of the broken trendline, a very common occurrence, and Keeping It Simple with Elliott Waves

Do Dramatic Moves Suggest Further EU Breakup?

The Wolf suggested traders take the week off, and despite the dramatic moves, one could have made the case that was the thing to do for swing traders, although it was a day trader’s paradise. Now that Brexit has come and gone, literally, what does that mean for currencies, and more broadly economies, and the Do Dramatic Moves Suggest Further EU Breakup?

Traders, Take the Week Off…

EURUSD We’re still bearish, looking for an expanded flat to unfold for wave (ii). Ideally, prices will remain below the down trendline to keep our count firmly on track. Obviously, we have event risk this week with the Brexit vote happening on Thursday. We might have a sleepy week until then, and then strong whipsaws Traders, Take the Week Off…

Brexit is Bad News For EU’s Overpriced Bonds

EURUSD We suggested that the 61.8% Fibo level would be helpful to the bearish case if our top count was correct. Indeed, the sharp reversal from that level keeps our top count intact. Now, we can use the wave 2 high as our risk control for both trading, and our top count. Should prices push Brexit is Bad News For EU’s Overpriced Bonds

The Coming Japanese Debt Forgiveness, Per the Elliott Waves

EURUSD Last week was picture perfect for our EURUSD call. A corrective bounce led to sharply lower prices, and while we’re now at trendline support, and near the wave (iii) low, we’d err on the side of lower prices. A wave (iv) bounce is due to develop, but calling bounces in a larger downtrend is The Coming Japanese Debt Forgiveness, Per the Elliott Waves

Scenario Planning With Elliott Waves

EURUSD There’s no change to our bearish view, and we can now lower critical resistance to the wave (i) low at 1.1386. If our top count, and bearish view, is correct, then prices are unlikely to see that level again until the ultimate low near parity. Look for the up trendline to provide some support, Scenario Planning With Elliott Waves

Elliott Waves Clearer Than Brexit

EURUSD Friday’s break left a three wave rally in place, which we’ve labelled wave (ii). We may get an early week rally attempt, but we think the euro has turned lower. That’s not to say it’s going to be a straight shot lower, in fact, after reaching parity, it seems likely that EURUSD will be Elliott Waves Clearer Than Brexit

Equilibrium Models in a Disequilibrium World

The Wolf was fortunate enough to spend a few days last week at the headquarters of Goldman, Sachs. I say fortunate because it’s always nice to interact with smart, thoughtful people, even if you happen to disagree about the outcomes with the vast majority of these rocket scientists. Essentially the firm opinion is that a Equilibrium Models in a Disequilibrium World

Two Beautiful Reversals

EURUSD We weren’t willing to commit to the idea that EURUSD had topped last week, but we are now. It appears there’s been a perfect reversal from the resistance are we identified long ago (red horizontal line). Unless prices push past last week’s high, we’re aggressively bearish. Notice that into last week’s top, we did Two Beautiful Reversals

How Soon Till Non-USD Problems Surface?

EURUSD Prices extended higher, but contrary to many people’s view, the euro isn’t out of the woods. In fact, we see prices vulnerable to a reversal. Given the ECB’s absurd corporate debt QE program, and its floundering economies, we think the euro will soon top. Despite our view that the Fed isn’t going to be How Soon Till Non-USD Problems Surface?

Central Bankers Attempt to Devalue Each Other

USDJPY The yen strengthened, as expected, after the triangle pattern was complete. While the bounce in wave (e) was towards the upper extreme, the bounce was a gift for the bears. Such a move is why the triangle is The Wolf’s favorite pattern. It has a defined, small risk level, the wave (c) high, and Central Bankers Attempt to Devalue Each Other

Triangles Are Coiled Tightly

EURUSD We know that the rally from last March’s low was in three waves, as was the decline into the December low. Given that, we’ve been looking at either a flat or a triangle. While the flat interpretation isn’t impossible, it is unlikely while prices remain below the wave (C) high. We’re looking for one Triangles Are Coiled Tightly

European Chaos or No News is Good News?

EURUSD Five waves up are complete for wave A, after a three wave decline for (D). We’ll look for an early week corrective decline to be followed by strength up towards the key 1.1080 pivot. After that it’s either chaos in Europe, or a resumption of policy divergence in the US that leads EURUSD to, European Chaos or No News is Good News?

Currency Wars Abound as NIRP Debated

Despite the economic fact that countries can’t devalue their way to prosperity, it doesn’t seem to prevent every country from trying it. As a general rule, a country’s currency follows the productivity of its economy. As such, a strong, productive economy usually results in a strong currency. Of course, a strong currency benefits all citizens who Currency Wars Abound as NIRP Debated

Right Side or Left Side of the Chart?

EURUSD Once prices pushed about 1.0968 they wasted little time. Since they pushed about our cited critical resistance, we’ve altered the larger count. Certainly, the Sustainable Bear readings allow for prices to collapse to a new low, which is exactly what our count suggests. It’s just that we’re likely to see prices push back into Right Side or Left Side of the Chart?

Commodity Currencies Suggest US Dollar’s Run Ending

EURUSD We’re still sticking with the view that EURUSD is in a fourth wave. It appears to be unfolding as a triangle with wave (e) either complete, or nearly so. Notice that RSI has dropped below 50, and with prices below critical resistance, there’s not really a reason to fight lower prices. A trendline drawn Commodity Currencies Suggest US Dollar’s Run Ending

Global Risk Weakness, But not Euro

EURUSD Prices turned up sharply this week, even as the USD remained stronger than other pairs. Prices closed above the up trendline, when they had all the chance in the world to move lower. That suggests wave 4 is still in progress, or that the alternate count is correct, which suggests prices are in wave Global Risk Weakness, But not Euro

2016: Year of the Terminal Rally

The year 2015 was one of divergence. The S&P 500 closed very near its all-time high, despite the significant declines in the Russell 2000, Dow Transports, junk bonds, energy, materials and retail stocks. A sustainable trend is typically marked by uniformity, where every index acts nearly the same. Trend divergence, or non-uniformity is a sign 2016: Year of the Terminal Rally

ZIRP No More, Dollar Into a Top

Well, the Fed finally did it, hiking rates up to .25%. Now, most Fed watchers are suggesting that rates will hit .75% by the end of next year. Yeah, and all of those Barron’s “expert forecasts” suggest that the S&P 500 will hit 2200 next year on the back of $125 in earnings. Things are ZIRP No More, Dollar Into a Top

ZIRP to End, Long Live QE

Here’s our latest Elliott wave currency forecasts. It seems that the EURUSD chart dictates further USD strength, which likely means a not awful employment report this Friday, or any other terrible economic news. That in turn, allows the Fed to do a mini-hike of short term interest rates, which may wreck havoc on the repo ZIRP to End, Long Live QE

One Step and a Face Plant

It seems likely that the Fed will raise rates in December despite some underlying weakness in the global economy. That would explain our “stronger dollar” theme in today’s report. Perhaps it’s “one and done” though, where the Fed raises rates 25 bps in December, only to proclaim QE4 as an emerging market/junk bond bubble default One Step and a Face Plant

Fed Hiking in December Say the Elliott Waves

EURUSD Prices didn’t rally in an impulsive manner up from the March low. As such, the larger trend is down. Since prices have now broken the up trendline, and RSI hit Sustainable Bear territory bulls have little in their favor. A bounce for (ii) is awfully small, but how much of a bounce do you Fed Hiking in December Say the Elliott Waves

The Dollar’s Resurgence?

EURUSD Regardless of what we think about the Fed’s inability to raise rates, the dollar seems to be powering higher versus the euro. Last week’s trendline break completed a five wave decline, and it also pushed RSI into Sustainable Bear territory (lower grey zone).  As such, a corrective bounce will re-leave the selling pressure, likely The Dollar’s Resurgence?

Quick Elliott Wave Forex Update

The Wolf is taking the family to Disney World tomorrow. But, after packing I wanted to share a quick update. There will be no update this weekend, and next weekend’s will be Sunday night and brief. We’ll be back to the normal Saturday updates the following week. EURUSD The market has done nothing to disprove Quick Elliott Wave Forex Update

Fed Delays, But Markets Bigger Than Policy

To many, the fact that the Federal Reserve pushed out its rate hike plan till later this year (and lowered the longer term NAIRU rate) came as a bit of a surprise. After all, employment, GDP and the stock market suggest that things are seemingly fine enough for a measly 25 bps hike. But, the Fed Delays, But Markets Bigger Than Policy

Fed in Focus, What do Elliott Waves Say

EURUSD We mentioned last week that the spike into Sustainable Bull territory was a concern, and certainly this week’s action makes it look like the euro bulls are in control. But, prices have failed the last seven times they’ve reached the 1.1500 resistance area, and we think that’ll be the outcome this time. We have Fed in Focus, What do Elliott Waves Say

Wolf’s Prey Elliott Wave Review

With the holiday weekend, I’ve been a little slow with the report. Let’s get right to the charts with our Elliott wave currency forecasts. EURUSD If the euro is going to find support, it should do it from just below current levels. The 1.1100 area has acted as support and resistance since back at the Wolf’s Prey Elliott Wave Review

Nailed It! Elliott Wave Forecasts Prove Correct

As we’ve written many times here, “Policy Divergence” is a US dollar bull fantasy. This week, as risk markets became unglued, the probability of a rate hike in September is around 30% based on the Fed Funds futures market. In fact, there’s now only a 50/50 chance of any rate hike this year. Add to Nailed It! Elliott Wave Forecasts Prove Correct

Not Exactly a “Great Fall” But…

If our Elliott wave currency forecasts are correct, look for more chatter about the Fed leaving rates alone in September. It’s long been our contention that the Fed really doesn’t care about serial bubble blowing or normalizing policy. If it did, it could have raised rates by a measly 25 bps by now, considering the Not Exactly a “Great Fall” But…

Elliott Waves Say Dollar is Humpty Dumpty

The initial reaction to Friday’s lackluster US job’s number was to buy dollars. But, that didn’t last long, and by the close it seems that more traders are warming up to the idea that the Fed won’t be raising rates substantially, even if it does something in September. While the commodity smash is in full Elliott Waves Say Dollar is Humpty Dumpty

December Not September for FOMC Says Elliott Wave Forex Counts

The Wolf likes to think individual traders have some great advantages. We can sit around in cash, only taking risk when it’s appropriate. I’ve heard trading described as fishing, a lot of time waiting around, and very little time spent reeling them in. Our focus tends to be laser-like when we see a clear opportunity. December Not September for FOMC Says Elliott Wave Forex Counts

What Doesn’t Go Down – Elliott Wave Forex Counts

This week, let’s get right into the charts for our Elliott wave forex forecasts. EURUSD Last week we were looking for a slight dip in EURUSD followed by an upside reversal, and that’s exactly what we got. We were leaning on two facts:  1. Daily RSI hadn’t fallen into Sustainable Bear territory (lower grey zone), What Doesn’t Go Down – Elliott Wave Forex Counts

As the Euro Churns: Elliott Wave Edition

A fund manager friend of ours is fond of saying that European politics has always been dysfunctional, and it will always continue to be. After last week’s dramatic OXI vote from Greek citizens, the euro was sold reflexively, without regard to the euro being a stronger currency without its weakest link – Greece. With the As the Euro Churns: Elliott Wave Edition

Greece & Puerto Rico Influence Elliott Wave Forex Counts

With the unprecedented IMF default from Greece this week, and the tacit admission from Puerto Rico that it is bankrupt, it seems that this credit cycle has peaked. Both are similar in nature to the March 2008 insolvency of Bear Stearns. At the time, The Wolf was short financials (LEH, MER, FED, FNM, etc.), and Greece & Puerto Rico Influence Elliott Wave Forex Counts

Elliott Wave Currency Update Post Greek Default

As we said this weekend, a disorderly default seemed more likely. Whether or not the game of chicken between Greece and the troika ends in an official parting of the waves, or one side gives in (The Wolf believes one side will cave.) to the other’s demands, that won’t change our Elliott wave currency forecasts. Elliott Wave Currency Update Post Greek Default