Euro Price Action Post-Election: "We Expected That"
Our Currency Strategist Outlines His Long-term View of the Euro
By Elliott Wave International[Editor's note: The text version of this interview is below.]
Alexandra Lienhard: I'm Alexandra Lienhard for ElliottWaveTV, and today I've snuck into Jim Martens' office. Jim is Elliott Wave International's Senior Currency Strategist and editor of EWI's Currency Pro Service. Jim, thanks for taking a couple of minutes to sit down today.
Jim Martens: It's my pleasure, Alex.
Alexandra: Now Jim, you have been consistent in your long term view of the euro. And I'm curious, did the U.S. presidential election affect that, beyond the initial knee jerk reaction? What's your long-term view of the Euro?
Jim: Well, we've been bearish for a number of years now, really. Going back to 2008, that's where the euro peaked at its all-time high near 160 and then it had a plunge and it spent a number of years consolidating from there. We call that a triangle from an Elliott wave perspective. We expected a thrust to the downside. We saw that in March of last year. And then it repeated that same sideways pattern since then.
What was interesting in terms of the election is on election night as it became apparent that Donald Trump might win the election, the euro spiked against the dollar. And we were expecting that.
Alexandra: So, then let me ask you this, on the heels of the U.S. presidential election and the news headlines that have since come out, how do you factor in news and events into your analysis?
Jim: Well, Alex, I really don't. We believe that the news is really coincidental to market movement. That it's really crowd psychology that moves prices. So, in this case, we had a pattern complete. So whether Donald Trump would win the election, or Hillary Clinton, we expected Euro-Dollar to reverse course abruptly and continue lower -- and that's what we've seen.
Alexandra: And is that how you kept subscribers ahead of the Brexit trade a couple months ago?
Jim: Exactly. It's all about the pattern. That was really the same thing. We saw a pattern earlier in the year. From February to May cable recovered in corrective fashion. So, even though cable then spiked through June up into the date of the vote, we expected a sharp reversal and of course we all know what happened. As soon as the results of the vote were announced, what happened to cable? It plunged.
Alexandra: Now, circling back around to the markets and changing gears for a second, you've also been a strong advocate for a weak Canadian dollar. That seems to be working out.
Jim: It has, since May. To start the year there was a huge decline in Dollar-CAD and since May we've seen a recovery. It looks corrective, but so far no sign that it's complete.
Alexandra: Well, we'll have to stay tuned. Thanks for taking a couple of minutes to talk today, Jim. Appreciate it.
Jim: My pleasure, Alex.
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