EUR/USD: What Moves You?

By Vadim Pokhlebkin

Today, the EUR/USD stands well below its November peak of $1.51. Find out what
Elliott wave patterns are suggesting for the trend ahead now — FREE.
You can access EWI’s intraday and end-of-day Forex forecasts right now
through next Wednesday, February 10. This unique free opportunity only lasts a
short time, so don't delay!

Learn more about EWIs FreeWeek here.

What moves currency markets? "The news" is how most forex traders would
undoubtedly answer. Economic, political, you name it — events around the world
are almost universally believed to shape trends in currencies.

A January 14 news story, for example, was high up on the roster of events that
supposedly have a major impact on the euro-dollar exchange rate. That morning,
the European Central Bank announced it was leaving the "interest rate unchanged
at the record low of 1% for an eighth successive month." (FT.com)

The euro fell against the U.S. dollar after the news. But could it have rallied
instead? You bet. In fact, traditional forex analysis says it should have.
Here's why.

Analysts always say that the higher a country's interest rates, the more
attractive its assets are to foreign investors — and, in turn, the stronger its
currency. Well, U.S. interest rates are now at 0-.25% and in Europe, at 1%, they
are 3 to 4 times higher. Isn't that wildly bullish for the EUR?
Apparently not, and wait till you hear why — because in today's announcement
ECB president Jean-Claude Trichet warned that European recovery would be
“bumpy.” Ha!

By no means is this the first time a supposedly bullish event failed to lift the
market. On June 6, 2007, for example, the ECB raised interest rates. Bullish,
right? But the euro didn't gain that day, either — the U.S. dollar did.

Watch forex markets with these "inconsistencies" in mind and you'll see them
often. In time you realize that it's not news that creates market trends — it's
how traders interpret the news. That's a subtle — but hugely
important — distinction.

So the real question becomes: What determines how traders interpret the news?
The Elliott Wave Principle answers that question head-on: social mood — i.e.,
how they collectively feel. Currency traders in a bullish mood
disregard bad news and buy, leaving it to analysts to "explain" why.
Bearishly-biased traders find "reasons" to sell even after the rosiest of
economic reports.

If you know traders' bias, you know the trend. How do you know? Watch Elliott
wave patterns in forex charts – it's reflected in there, on all time frames.

Today, the EUR/USD stands well below its November peak of $1.51. Find out what
Elliott wave patterns are suggesting for the trend ahead now — FREE.
You can access EWI’s intraday and end-of-day Forex forecasts right now
through next Wednesday, February 10. This unique free opportunity only lasts a
short time, so don't delay!

Learn more about EWIs FreeWeek here.

Vadim Pokhlebkin joined Robert Prechter's Elliott
Wave International in 1998. A Moscow, Russia, native, Vadim has a Bachelor's in
Business from Bryan College, where he got his first introduction to the ideas of
free market and investors' irrational collective behavior. Vadim's articles
focus on the application of the Wave Principle in real-time market trading, as
well as on dispersing investment myths through understanding of what really
drives people's collective investment decisions.