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The monthly NonFarm Payroll Report is by far the largest economic data report in the financial universe. Will you be trading with conventional wisdom or about collective perception of what will happen or not happen once this data report hits? Chart price patterns provide identification of potential trades with a varying degrees of risk reward attached to them. Certain chart patterns provide low risk and high reward trades, and its these patterns we should be focusing on. Below is the current six month chart and analysis on the EURUSD Euro Dollar. But first, lets talk about the USA Federal Reserve.

So why has the US Dollar been so strong lately? The key to the U.S. dollar's health is… well, the U.S. Federal Reserve's interest rate policy, of course. The higher the rates, goes the conventional thinking, the more attractive dollar-denominated assets become to foreign investors, which is "good news" for the dollar.

But with the Fed now leaving U.S. rates unchanged three times in row, analysts are starting to say that we "may now be entering a prolonged period where the central bank keeps rates unchanged" (AFX News). Which, of course, is bad news for the buck.

So wouldn't it be ironic if the dollar got stronger against all odds and surprised everybody?

It wouldn’t be the first time. Remember how in December 2004, for example, it stood at an all-time low of $1.356 against the euro and Y102.58 against the yen, and everyone expected it to crash? Yet by the end of 2005 the USD had defied all the bearish forecasts, to gain 14.6% on the EUR and 15.2% on the JPY. That was its best performance in years.

That's why it may be a stretch to say that it's the Fed's rate policy that determines the dollar's strength. Collective perception of the effects of the Fed's policy has a much greater effect. And few other methods allow you to track forex traders' collective emotions as well as Elliott wave analysis.



As you can see, it appears that EURUSD is now in a contracting triangle, as Elliotticians call it. It's an ABCDE move; today's (Oct. 31) EURUSD rally has probably completed wave D. And now wave E, the final wave in the triangle sequence, could tip the balance in the dollar's favor, sending this pair lower.

To take advantage of this potential trading opportunity more effectively, you would probably need to "zoom in" on the wave patterns and learn where the key support and resistance levels are. Our Currency Specialty Service can help you with that right now.

Click the NonFarm Payroll Data & US Dollar header link above to learn more about the low risk high reward trades.

Good day and good trading.

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