EURUSD Forecast and Review – January 2016

Start for the EURUSD in 2016 was choppy to say the least.  It has not been easy with other pairs either. This is when long-term wave analysis comes in handy. Previous EURUSD forecast did not expect such a long corrective structure. To have a directional bias, an expectation, is priceless; regardless of whether or not the market plays along your expectations. Nevertheless, this EURUSD forecast is based on wave analysis. Fortunately the Elliott wave theory explains corrective structures and their possible pattern formation in great detail.

EURUSD forecast Daily chart

EURUSD is in a corrective structure across all time-frames. It does not mean that we cannot find opportunities to trade. On the daily timeframe, price barely moved from the starting price of the month. The net move of the month is just about 27 pips. So it’s a massive two month-long correction which still has not ended. Or has it?

EURUSD forecast 4H

Looking at the H4 time frame, we can see a near-perfect (presumably completed) contracting triangle. Hence the reason for the volatility that we saw during the past month. But it’s also some valuable information for our EURUSD forecast as well. EU is the mother of all currency crosses. When EU is in such a corrective structure, quite naturally, we would see sudden moves in other currency crosses as well. But in the end, all the moves are just pieces of the puzzle for corresponding wave patterns of each pair it its own context.

Hindsight analysis is straightforward and boring, that even my 6-year-old daughter can tell her own story of a chart. The million dollar question is, what next?

EURUSD Forecast

I have been waiting for a big impulsive bullish move of EUR since the start of this correction. This EURUSD forecast is based on this expectation. I was wrong to assume the end of correction in the beginning of this month for obvious reasons. None the less, the expectation is still towards the upside. But price is at a crucial point.

The key is to note which way the triangle would be broken and the personality of the wave that breaks the triangle.

There are 2 things that could happen:

  1. If this is the end of the correction, we will get a sharp impulse move up breaking the triangle structure and even piercing through the pivot level  of 1.1025 (marked by the green indicator line.)
  2. If the correction is still in progress we will get a quite aggressive push to the down. That would give a larger double three type of correction.

Obviously one cannot trade the same EURSD pair for both sides. You must have a directional expectation. My trade plan is simple at times like this. I have a long-term expectation for the next impulse. If price shows signs of breaking the triangle in a particular direction, then I will consider entering the market. But, if I enter short, it will be for short-term day trades, so I will manage the trade aggressively. If I enter long, I will look for longer term swing-trade type of entry.

So this is my EURUSD forecast and review of January 2016. Do you have a different view? Please share your EURUSD forecast in the comments. Thank you.

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