Technical analysis is often met with skepticism. It is often claimed to be nearly useless. We do not agree with this point of view. Neither do some of the most reputable investors of our time. Stanley Druckenmiller, George Soros, and Paul Tudor Jones are just a few examples. They disclosed in books and interviews to include technical analysis in their decision-making process. The following example gives an overview of our EUR/USD technical analysis over the course of 2017/2018.
We were bullish throughout the 2017 EUR/USD cycle. On February 8th 2018, we forecasted one last swing into the 1.255-1.265 area before the cycle is complete and reverses. The EUR/USD went straight into our target 8 days later. A reversal occurred on February 16th.
The subsequent sideways pattern into April 2018 was viewed by an overwhelming majority of technical analysts as a triangle that resolves to the upside. We forecasted the exact opposite – a resolution to the downside. Our forecast got confirmed and the EUR/USD quickly corrected down towards 1.15.
One of the main challenges within the Elliott Wave Framework is to assess the duration of trends. Elliott wave analysts get often fooled into calling a trend reversal too early. Our methods account for this problem, which we see very often among chartists. The next chart below shows our forecast on May 14th, 2018.
It is important to reassess all new information as prices move along. A more precise forecast results from that. All in all, there is little value added to stick to a 1.12 forecast just because it was made around the top. Price action usually reveals more about the short-term path. It is almost impossible to forecast on March 1st what path is likely during the Month of June. That is very different just shortly before as the subsequent market action revealed.