October Commentary

Elliott Waves work with currencies or forex (foreign exchange)? Let's have a look at the Canadian dollar versus the United States dollar. First we must keep in mind that even a small change in value translates in a fair sized value for the contract due to the use of a margin as well as a multiple. For this reason we cannot afford to sit and wait if the direction is against us; we must cut or loss very quickly. The pattern deploying is a wave iii where the sub waves are out of phase...that is the pattern for the small numbers has failed during wave (1) but recovered, and now wave (3) is going through several extensions as shown in the red ellipse.

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These successive extensions are only a way to tell us that the 8% sensitivity is not adequate for the present volatility exhibited by the currency at this time. However the 21% and the 13% make a better picture. So, is the wave iii nearly completed? This is where you get a better chance than other techniques; the Elliott oscillator shows that the level of change is not as high as during the wave i (look at the thick red line in the bottom window). We should expect a small correction but the upward movement will resume its course. In addition, we could use Fibonacci numbers to pick first the support level of the correction and then the resistance levels to complete wave iii. At all times you have a set of ressources to set your expectations against which the currency will be compared.