In earlier posts I said that the US dollar should retreat deep in a wave 2 correction before charging higher. Today's action makes me think that I was wrong. Observe my attached EUR/USD 1hr chart; it shows that today's break beneath 1.4349 makes the entire rise from 1.4216 a completed 3 wave affair. Also, if you look at the attached 8hr chart of the EUR/USD, the "right look" guideline of EWP also applies well to this current posted count that the recent really was just a 4th wave, with a 5th wave to new lows on the horizon.
Now it's possible the EUR/USD is in an X wave right now, and will rally again in an A-B-C fashion to complete a "double zig-zag" correction. So if I were to short the EUR/USD, I would place a stop loss just above the wave C high of 1.4458. However I don't think this will happen for two reasons: 1) notice the power and speed of the current decline to beneath the wave B lows in the 1hr EUR/USD chart. It appears that the strong downtrend over the past few weeks has resumed, and that it's a bit too strong to be an X wave, which is a countertrend wave; and 2) as you can see from the attached GBP/USD 1hr chart, this pair has already made a new low suggesting that in fact the downtrends in dollar pairs have resumed.
I personally am not trading the dollar right now as the risk of a huge and strong snap back wave 2 is too high, so I have no position in any dollar pairs yet. I'm going to wait until I can catch the wave 2 move, which should be quite deep. Also, the Dow rallied above the key level I cited earlier which negates the 5 wave decline I illustrated several times. Until the holidays pass, and volume re-enters the markets, equities should continue to float sideways or higher.
I hope you all are enjoying your holiday season; I'll be back when something significant develops.
Cheers!
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.