EUR/USD Longer Term View

I am a short term forex trader. 15 minute and less chart views are my constant companions day in and day out. While the Elliott counts at the short term are paramount to my trading success (see my 2009 trading results), the longer term view is the foundation that I based my level of confidence in trading short term. Always best for me when working with Elliott wave to begin at the 30,000 ft view and work my way down.

In my experience in trading using Elliott Wave and technical analysis as my guide, it is far easier being wrong in a trade having high levels of confidence in the longer term trend, that it is being wrong without that confidence. It allows for me to have the patience to wait out a trade, even if it turns against me short term. I cannot tell you how many times this has helped me make a profit on a trade. I tend to be early to the trend, so knowing what is happening at a higher level is a must.

I believe that the EUR/USD is in Primary wave 3 (or C) down from all time highs made in 2008. For practical purposes, at the moment it does not matter whether we are really in a wave C or a wave 3 at the Primary degree level. The implications for the immediate future are the same in both cases. Once we get to near to the bottom of wave 3 or C, the differences will become much more important and I will have much more discussion and analysis to show for each possibility.

Here is the weekly chart view of the EUR/USD showing this perspective:

This view is primarily founded in the structure of the [B] wave. Regardless of how you count the [A] wave above (I have seen compelling arguments for counts as 3 wave corrective and 5 wave impulsive that are compelling), the [B] wave cannot be counted as impulsive.

Even more convincing to me though is that, the (A) wave of the [B] wave is in 3 very clear waves. Certainly, it is a very extended 3 wave form, but it is also very common for the C wave of a 3 wave form to extend. Late in 2008 and early in 2009 the big question on the table for Elliott wavers like myself was whether or not the massive move up would turn into 5 waves. In this case, the market revealed to us strong evidence as to the larger counts.

Sometimes, using Elliott wave analysis, the count is not as clear and additional analysis with additional tools may be necessary. In this case, it is not.  In many years of analysis, I have learned not to over-analyze a clear picture. Much of what happens in Elliott wave patterns is clear, given enough time for the pattern to reveal itself. As a general rule of thumb, if the pattern is not clear, then there are two things likely happening: either the trend you are in is not finished OR more time is needed for the new trend to take shape. To trade successfully in such times additional tools are needed to help clarify a count that may not be obvious. In this case, neither of these two lessons applies. Remember what I said about confidence above? Over analysis can lead to paralysis through confidence erosion, with poor trading usually the result.

Ok, so where does this leave us? Here is the counts I believe map our current location (from Primary Degree down):

Primary Wave 3 (or C)
Intermediate Wave - 1
Minor Wave - 5 (as of this posting on 3/22/09)

 A magnet for Intermediate wave 1 to end is likely near trend channel support. Where along the trend channel is questionable, but there is a high frequency of wave 1's having a fibonacci relationship to wave 5's. Many times they get very close to equaling each other. The point at where wave 5 would equal 1 is approx. 1.289. Since 1.289 falls along the trendline in ealy to mid May and the fibonacci fan includes this area within it's structure in that same proximity, this is the area I will be watching for the closest. Of course, the shorter term wave structure will be paramount in determining whether wave 5 gets there or falls short at another fib. level, or even breaks through. Trading is probabilities, though the area surrounding 1.289 in early to mid-May appears strongest right now.

Most important is that once 5 waves are complete, we should have a significant, multi-month bounce in the form of intermediate wave 2 that will partially retrace the entire move down from 1.51+.

For more study, and an in-depth look at the USD, Binve has put together an a excellent long term USD and EUR/USD analysis. Binve's Thoughts on EURO & Dollar Long Term

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