Tuesday, October 27, 2009

Evidence of Major Dollar Bottom Mounting

The USD/CHF, which almost mirrors the US Dollar Index (DXY or USDX) has rallied now in a clear 5 wave impulsive pattern suggesting that the US dollar has most likely formed a multi-month/year bottom. The decline can count complete with a 5th wave ending diagonal within another 5 wave decline within a C wave. The rally from the bottom has now done so in a clear 5 wave impulsive pattern, breaking, and so far holding above, a key trendline that has capped the decline since October 1st. But with 5 waves up that MAY be complete here, a small correction is possible, and the trendline is an obvious target for wave (ii) to find a bottom before an even stronger rally gets underway.

The evidence is mounting that a long term dollar bottom is in. Evidence supports the bulls, and any pullback in the USD/CHF I'd buy with a stop below 1.0032. If the larger wave count is correct on the dollar, it can rally 2500-3000 pips against its euro and swiss franc counterparts in the coming months!

The EUR/USD also broken through the key level of 1.4828 I mentioned yesterday that would give a strong indication that the euro topped against the dollar. A short EUR/USD position could be established with a stop just above the 1.5062 high.

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