The euro is trading beautifully against the dollar

Right on cue, the euro is following John C Burford's analysis of the charts to the letter. So, where is the single currency heading to next?

On 8 January, I was tracking the progress of the EUR/USD. I forecast the downward move as a five-wave pattern. This was the chart:


So far, the move off the 1.39 spike high is in four waves. What I was looking for was a final fifth wave down to terminate close to 1.35 at the Fibonacci 62% level. Let's see how this has played out:

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

I did get my fifth wave. In a textbook move, it carried to the 1.3550 area and on a large positive-momentum divergence (red bar). But it didn't quite carry to the Fibonacci 62% level. Since that does happen, we must be alert to these near-misses.

Knowing when to exit

If you religiously stick with your exact Fibonacci level as your exit, you may see the market just fail to hit it. The market then moves against you and takes away your hard-earned profit. Don't let that happen to you!

Advertisement - Article continues below

Could this be a major move up?

Let's back up a little and see where the market is positioned in the larger picture:


The upper tramline pair is the one I showed last time. And with the tramline break, I could draw in my third (lowest) tramline equidistant. This tramline now offers a short-term price target. And lo and behold, the market dropped to the new tramline and turned back up from that support line. Isn't that pretty?

A short trade taken at the tramline break and exited near the lowest tramline would have produced a gain of 100-150 pips.

No-man's land

The alternative is for the market to test the lower tramline and eventually break below it. Remember, the current rally is totally expected after the five waves down. Although it can be viewed as a three-wave affair, it is not a totally convincing A-B-C.

It's time to back up even more and look at the bigger picture:


Here is my large wedge pattern where the trend lines are converging and the market is very close to the lower line. When markets move out of their wedge, they often move very swiftly, which places the area just under the lower line as my danger zone (for the bulls).

Advertisement - Article continues below

And with the clear five waves down just completed on the hourly chart, the main trend is very likely down.



Spread betting

Boeing's share price plummets: here's how to play it

Boeing shares have fallen by a third this year. But there could be worse to come. Matthew Partridge explains how traders should play it
10 Feb 2020
Share tips

How my 2019 spreadbetting tips fared

Matthew Partridge reviews performance of his 2019 spreadbetting tips. This year’s winners include Bellway, JD Sports and Taylor Wimpey.
17 Dec 2019
Spread betting

Betting on politics: some safe Labour bets

Matthew Partridge outlines a few flutters on what should be safe Labour seats in the general election.
10 Dec 2019
Spread betting

DS Smith will deliver: here's how to play the share price

Packaging group DS Smith is profiting from the online retail boom. Matthew Partridge explains how traders can play the share price.
3 Dec 2019

Most Popular

Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020

Money Minute Wednesday 12 February: grim times for European industry

Today's Money Minute previews industrial production in the eurozone, plus the latest from America's central bank.
12 Feb 2020

Money Minute Friday 14 February: The latest from RBS, Britain's state-owned bank

Today's Money Minute previews results from RBS – Britain’s state-owned bank – and from pharma giant AstraZeneca.
14 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020