[stock-ticker]

US Dollar vs EURO: The path to parity

The opportunity for a new (and final!) US Dollar appreciation vis-a-vis the Euro was analysed in a couple of separate posts from early May. The Euro strengthening since mid-March took a corrective shape (only three wave: A-B-C) which called for another wave up for the US Dollar. The scenario was clear: one final corrective move, as described on the chart, would finish the correction before the downward trend resumed. Wave 4 from the previous decline served as a guide how far the correction could extend. Corrections rarely extend beyond the price level of the previous wave 4.

Fig. 1 Prediction May 1, 2015

Dollar update

 

What happened after that has been a textbook example of how the Wave Principle works in real time and its powerful ability to expect certain price moves with a high level of probability.

The final corrective move hit the “price ceiling” determined by wave 4. After that the price began to slide impulsively in five waves. So far, wave 1 and 2 are nicely formed, as shown at fig. 2. The wildest ride (wave 3) has just begun. Expect violent US Dollar appreciation in the next several weeks. The previous bottom at 1.045 must be easily surpassed. Parity between the US Dollar and the Euro finally seems to be a real expectation.

Fig. 2 US Dollar advance in wave 5

dollar progress

 

PT readers can already move their stop orders above the peak of sub-wave 2. Thus, the realized profits will be locked even if the price unexpectedly turns up and the bearish scenario fails. This is the power of the Wave Principle: it provides a guiding map and one knows the his exact location on the road. Failing scenarios are early identified and the damage is minimized.

Traders should be always cautious. Profits are nice and make one feel good. Yet, good feelings are a recipe for a disaster. Stay alert! Just bear in mind that the party will be over in just several weeks, despite the increasing media frenzy in favor of the US Dollar; talks about Grexit and other bearish announcements. Markets always change directions when the sentiment is extreme. I can bet that the Euro bottom will coincide with the upcoming Greek default. When this event occurs  no one will see a reason and any “fundamentals” supporting Euro strength. As usual, PT readers will be timely informed when the reverse takes place.