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The US Dollar appreciation: exciting moves ahead

Our call for a EUR/USD parity back in May was quite premature. Corrections are sometimes difficult to predict: they can be complex and consume a considerable period of time before being completed. Nevertheless, the Elliott Wave analysis helped us in correctly identifying two important aspects about the US Dollar trend:

1. The possible end of the correction (the end of wave 4 from the previous decline)

2. The nature of the price move- corrective.

The two conditions suggest that the US Dollar appreciation will eventually resume. A trend never reverses with a 3-wave move; therefore, US Dollar bulls can stay calm and wait for the new leg towards parity. This is the value of the Elliott Wave analysis- it tells you when to stay calm, even if the short-term price moves are against you. Although the EUR/USD correction consumed considerably more time than expected (six months), our basic scenario remains relevant and highly probable. The price has completed a corrective pattern (A-B-C flat correction) and the price decline should resume immediately.

USD long term

The near-term price action is suggesting that the new leg down has began. There are 5-waves down (impulse) and a correction (3-waves) in the opposite direction. The observed correction reached the end of wave 4 from the previous decline. This pattern is a clear indication for the expected US Dollar appreciation. It is a low-risk opportunity to short the Euro. Even if the scenario fails, the expected gains (1300 pips) justify the risk of giving up 100-150 pips. Impulsive patterns are volatile and the price should easily reach the eventual price target- parity.

USD short term

This projection is based on chart reading and it predicts the future based on probabilities and assessment of the various scenarios. On the other hand, economists will start explaining the US Dollar appreciation once it already happens after the event. The possible interest rate hike by the FED qualifies as the best candidate in this case.