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.
7 comments:
great timely stuff - we need it!
;-)
Jaime Saettele at DailyFX also favors the EUR/USD as currently tracing out a 4th/5th wave combo, targeting 1.40-1.41.
If that turns out to be the correct dollar count, the wave 2 pullback could then be the perfect opportunity for the stock market to make a blow-off top and reverse. That is, assuming we ever see heavier volume again in the stock market.
GBP bounced back quickly. Any update? Thanks.
I'm taking my cues from the euro/usd. It has not rallied above my cited wave C so the count remains intact.
Todd
Happy New Year, may 2010 bring you health and happiness.
Thanks Michael! You too friend.
Todd
Bad news the Sp500 breaking today one important line and the FTSE, AEX, DAX, etc making new highs.
Nothing good for the bears.
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