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Thursday, February 24, 2011

Long term picture for USD

My EUR/USD chart only goes back to 1986, so I have looked at USD/CHF (the upper chart) as a good proxy and the USD-Index to get a longer term view of the USD.
Breaking down to a new all time low in USD/CHF doesn't fit my else slightly positive USD-view.
Therefore I took a new at the long term picture.

As can be seen above we have entered wave 5 down, after the breakdown from a big triangle, that had formed since 2005. The target for this thrust out of the triangle is at least the 76-77 area.

If we take a look at the decline since March 1985 we can count a five wave decline from 1985 down to January 1988 (3 year decline), which I have labled as wave A the following sideways consolidation (Double zig-zag) is wave B and we are now in wave C down. When wave C finally finds its bottom there is a clear risk that we still need a wave D (sideways) and a final drop in wave E in an ending diagonal.

Looking at the USD-Index the picture is pretty much the same. The difference is, that we haven't broken out of the triangle-consolidation yet, but the USD/CHF picture is more "clean" than the USD-Index and tends to lead the way. That does mean, that we should soon see the thrust out of the triangle-consolidation for a decline towards at least the 62 - 63 area.
The possible Ending Diagonal possibility doesn't seem as possible here, but it can't be excluded.

1 comment:

  1. I notice that there is a bullish divergence in USD Index D1 today

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