During last five years, a pair of Euro / dollar shows surprisingly precise adherence to Elliott wave theory. What is it - proof of the inviolability of the postulates of technical analysis or on a combination of fundamental factors behind the design of random fluctuations in the exchange rate in the wave theory? Most likely, neither is any other, because the truth is, as always, lies in between.

"Self-projection"
Ever since the emergence of the theory of Elliott's number of its adherents has been growing steadily, and thus gaining the effects of "self-projections."

The essence of this phenomenon is that the price fluctuations in the market of assets occur in accordance with the expectations of most market participants share the same perspective on the prospects for changes in these prices. Thus, it becomes clear that the best wave theory would work in markets with many participants, that is the most exact wave theory will be observed from the assets of high liquidity. Consider the theory of Elliott in relation to forecasting exchange rates.

Since its introduction
4 January, 1999 (indicated X in Figure 1) euro became the second, after the U.S. dollar, the global currency trading volume on the international currency market (almost all the major countries of Western Europe have moved to settlements in the single currency, making it a strong economic base) .

Fig. 1. A weekly schedule of euro / dollar, June 1998 - September 2001

Thus, the most liquid instrument in the foreign exchange market is a pair of Euro / dollar. For example, this pair we consider the extent to which the Elliott wave theory of root in a medium of currency speculators. To begin to recall briefly the basic provisions of this theory.

The basis of the wave theory is the assumption that the market is expanding to five waves in the direction of the main trend, followed by correction of three waves. The first five waves in general are impulsive wave, and the remaining three - correctional. In turn, the impulsive wave is divided into its impulsive (1, 3 and 5) and corrective waves (2 and 4).

Similarly, corrective wave consists of the impulsive waves (A and C) and correctional (B). Descending a detailed description of the nature of each wave, let's mention that the numerical ratio of the waves associated values derived from the sequence of Fibonacci numbers: 0.236, 0.382, 0.5, 0.618, 0.764, 1.0, 1.618, 2.618, 4.236 ... The following weekly schedules euro / dollar (Fig. 1 and 2), covering the entire existence of the single currency, the beginning of each wave and podvolny indicated by numbers and letters. Next to the numbers marked by waves of extreme values of the euro (small print) and, in brackets shows the rollback corrective waves as a percentage relative to the preceding impulsive wave.

It should be noted that the best results of forecasting the exchange rate reached a combination of technical analysis in the Elliott wave theory and the classical trend analysis. Both types of analysis are the most popular among the speculators, and the need to combine them again, based on the effect of "self-projections."

Start: sad falling euro
The advent of the single currency, coverage of 11 major European countries, was greeted by speculators cautious. Without the past, the euro-zone was evaluated from the perspective of historical analogies: from the moment of its birth, the euro began doleful way down. Active demand for the dollar is also growing strong economic growth the U.S. economy and rising U.S. stock market. Approaching mid-July 1999 to the psychological barrier of parity (1 euro = $ 1), the course has formed the first wave of downward movement (1.2401-1.0104).

After correction of 38.2% started in the 3rd impulsive wave (from 1.0917). Nodes 1 and the 3rd wave helped to identify the boundary downward trend of the euro. The end is the 3rd wave in May of 2000 (0.8840) confirmed those boundaries. From the basic facts that were in force in the 3rd wave, it should be noted strong demand for the dollar because of the discount rate the Federal Reserve System United States (two promotions 0.25% since the beginning of 2000) against a background of achieving stock indexes new historical highs. And while the European Central Bank (ECB) held a similar raise the refinancing rate, the response rate to the euro have been directly opposite. The thing is that they enhance the market were considered as response to the ECB, to prevent the widening gap in rates between U.S. and euro area, in order to stop the vast drop in the euro. And if the States raise rates to cool the rapid growth of the economy and avoid a surge of inflation, the situation in the euro is fundamentally different from the trans-Atlantic issues.

Inflation in the euro zone in the first place was due to increase in the cost of imported raw materials and energy due to the depreciation of the single currency. All this was accompanied by the same key-a litany of European authorities on allegations of unfair undervalued and great prospects for the new currency. But market players are always habitually sold euro after any action (or inaction) of the ECB or the statements of officials, both of which dealt with the exchange rate, ulavlivaya this note of despair and inability to change the current state of affairs.

The final stage of the 3rd wave was timed to coincide with the next, the expected increase in rates in the United States. May 16, 2000 the Fed raised rates by 0.5%, bringing it to the level of 6.5%. The repetition of the historic minimum (0.8840) for the third day after increasing the changed turn trend. Here, the market has played on the "Buy on rumors - sell on fact", and players started to buy euros in anticipation of similar aggressive action by the ECB (wave 4). Moreover, the prevailing rates in the United States in line with the upper limit of historical values, where the economy is beginning to shift to the stage of stagnation.

Joint intervention
In early June 2000 the ECB announced raising the refinancing rate by 0.5% to 4.25%. Market players dotyanuv by the time the euro rate to the level of 0.9704 (correction of 38.2% from the 3rd wave), on the same day sold the facts ", initiating the development of the 5 th, the latest wave of downward movement of the euro. Now the technical guidance for the next historical minima of the euro have been clear to all.

First, the boundaries are clearly marked downward trend in the second wave analysis pointed to the need for further depreciation of the euro, to complete all pyativolnovuyu impulsive formation (the strength of the downward trend is indicated and both the previous correction of 38.2%). According to Elliott wave theory, the magnitude of the 5 th wave is 0.382 or 0.618 motion magnitude, distance from the beginning of the 1 st to the end of the 3rd wave (ie, from 1.2401 to 0.8840). Thus, the calculation of the first objective of the 5 th wave gives the following result: 0.9704 - 0.382 x (1.2401 - 0.8840) = 0.8343 dollars per euro.

Disregarded the ECB raising rates on the last day of August (+0.25%), 20 September 2000 the euro reached another historic minimum (0.8437) near the line of support down-trend. After two days after the start of the technical correction was carried out first in the history of Euro joint intervention by the ECB, the Fed, central banks of Japan, England and Canada (+ indicated on Fig. 1 and 2). Euro Exchange, stood at 0.8570 bid morning, during the intervention зашкаливал for 0.90! But even this is not forcing players to withdraw from long-term short positions on the euro.

It may not be this intervention, we could observe a scenario similar to the 4 th wave, but were skeptical the market took this artificial intervention, regarding it as a course of wa-bank.