Video – Forecasting Currencies – Retro Series Part 2

This is part 2 of the webinar recorded back in 2005 with top-ranked money manager, Michael Mansfield.

During this video, Mansfield provides a forecast he previously made on the US Dollar Index and discusses how the value of the Dollar might be affected going forward. He also forecasts the price of the Australian Dollar, as well as the British Pound, Euro and Japanese Yen. Like in the prior video, Mansfield uses Elliott Waves in his analysis, but also introduces the use of Andrew's Pitchfork as a forecasting tool.

Traders who follow the market reports in the forecast section of our blog should review these videos to get a more in depth understanding of the underlying methodology.

Notes and Summary on the Video (April 5th, 2005)

Even though Michael Mansfield is an experienced trader who can forecast any market, his specialty and passion is foreign exchange, and his firm specializes in the management of spot currencies. He explains this at the beginning of the video.

The first instrument he analyzes is the US Dollar Index. He explains, "…we look at the dollar index because it’s a basket of many different top currencies. And it does provide a guidepost for our overall strategy." The predominant tools Mansfield uses in the forecasting of the markets in this video are, Elliott Wave theory (which he explained during part 1 of this series) and Andrew's Pitchfork. He expresses the high degree of confidence he has in using the Elliott-Andrew's combo to accurately forecast the prices of currencies when he says, "…there’s no other way that I know of that will allow us to make these kind of extraordinary forecasts by not having all this information, both the Elliott Wave and these Andrews forecast."

Mansfield begins the analysis of the Dollar Index (DXY) by providing a forecast he made on August 6th, 2004. He explains that based on his analysis, USD should strengthen. He also explains how to draw the Andrew's Pitchfork on the graph:

"…Andrews Median Line. So what I do is this: I find a known bottom, and the next alternating known high, and the next alternating known low, and I’ll draw a line from here across, and I’ll bisect it. I’ll show you a better example here. And this line will pick the trajectory of the market. And it picked this top, and it picked the most recent high."

The second market Mansfield analyzes is the Australian Dollar versus the USD (AUDUSD), starting with a weekly chart and zooming in to a daily resolution. He summarizes:

"Ultimately, I think the Australian dollar should go back to the fourth wave of lesser degree, back into May lows of 69. So we’re expecting a nice move down here. As long as it doesn't take out the old highs, we’ll be trading this continually on the short side. Even though we might get a little bounce here."

The next pair analyzed is GBPUSD, the British Pound versus the USD.

Like in the first video, Mansfield discusses the accuracy of his system in capturing significant market moves. He says, "Most systems are 45-50% accurate. Our system used to be 45-55% accurate. Now it’s running at 60-80%. Matter of fact in February, I just checked one of our larger accounts, 72% accurate for our trades."

The next market Mansfield forecasts is the EURUSD. He starts by analyzing the monthly graph going all the way back to 1986, then the weekly chart, and finally, the daily time frame.

Regarding the behavior of the Euro in the following year, he states:

"At no time now in the next year would I expect the euro to go above 1.45. And preferably we’d like to see it go to 1.26 first, which is this median line here…Or possibly down to this lower line, which would be 1.16-1.14 area…that has the highest confidence level for a forecast for us right now."

Mansfield wraps the section on currencies with the Japanese Yen – USD pair (USDJPY).

In the next video, Mansfield analyzes crude oil and forecasts a drop in price – recommending that traders who are long oil exit the majority of their positions waiting for the decrease in price.

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