miroslava.micunkova's picture

Is EMEA too weak to face the Dollar destructive strength? USDTRL Elliott Wave Analysis

USDTRL has been moving in a major bull-channel since August 2008, separated by the periods of lengthy sideways corrections. The latest rally started back in February 2013 and peaked in January 2014 at 2.3890. The following correction is still under way today.

According to Elliott, “specific corrective patterns fall into four main categories:” 5-3-5 for Zigzag, 3-3-5 for Flat, 3-3-3-3-3 for Triangle and combination. The first corrective wave in our example originated from the 2.3890 peak. It is divided into five sub waves suggesting a zigzag pattern.

“In a zigzag, the length of wave C is usually equal to that of wave A” (as measured from the end point of the wave B), “although is not uncommonly 1.618 or .618 times the length of wave A".

Under such an assumption we are able to calculate the price target for the ongoing wave C. Considering the Elliott’s "rule of alternation", we expect the wave C to be sideways, contrasting the wave A. It's 0.618 multiple gives an initial target of 2.1044 while 1 multiple gives a target of 1.9795. The maximum correction can reach 1.7775 (1.618 multiple).

Once the correction is over the underlying rally is expected to resume. Initial target we are looking for is at the top of projected bull-channel now at 2.4785 (rising by 0.0021 a week). Long term targets (6 month +) are derived from the .618 and 1 multiples of the August 2008 – January 2014 rally and point at 2.7486-3.2221.

As per analysis described above, we assume that USDTRL is on a verge of a new “8 wave” cycle. The ongoing correction may offer favorable entry points at 2.1044 possibly 1.9795. Our initial target for an expected rally is 2.4785 (rising by 0.0021 a week), long-term targets are pointing towards 2.7460 and 3.2178. 

Prechter R., Frost A. (2005). Elliott Wave Principle. Georgia: New Classics Library