USD at a long term bottom?

The EUR/USD picture (see the chart below) has become very cloudy this last couple of weeks. I have been looking for one last high in EUR/USD to end the ending diagonal since 118.75, but no new top has been seen yet. As long as support at 140.09 isn't broken to the downside we could still see this new high above 149.39, but any break below 140.09 would cripple that posibility.

Looking at the USD-Index might help us a little. The picture is pretty much the same as for EUR/USD. Ideally we should see one last low below 72.69 finishing the ending diagonal, but we have only seen a decline to 73.42. If we break above 75.75 the possibility for the new low would be cripple here too and call for a truncated wave e. A break above 75.75 should set us up for a quick test of resistance at 76.71 and above here will confirm the truncation and confirm that an important low is in place.

As I said a couple of days ago USD/CHF could be at or very close to an important low here too. The most likely scenario will be, that we will see a periode where we more or less trades sideways, before breaking up in earnest. The other possibility will be a "V" shaped bottom, where we will see USD/CHF speed ahead higher. We will need a break above 84.00 just to be able to suggest that the bottom is in, but lets try to fine tune as we get more evidence.

USD/JPY much to my surprise has made a new low. The best fit here againe seems to be, that an ending diagonal is building. We might still see a lower low, but all demands is now fulfilled and any break above 82.23 would indicate that the bottom is in place. A break above 85.54 will confirm the bottom for a rally back to near 115.00.

As long as 81.48 protects the upside we could see a new low, but and break above 81.48 will weaken the call for a new low, while the break above 82.23 will invalidate any call for a new low.

USD-Index My most bullish count demands a rally soon

As long as the support at 77.37 protects the downside, my most bullish count is still valid. With that said the decline from 78.44 has a clear five wave look, which would call for a three wave correction and then one more decline in a simple zig-zag correction. Therefore if 77.44 is broken to the downside, then the best count becomes, that black circle wave 1 (not shown) is the best count.

A break below 77.44 would call for a decline to at least 76.90, but more like to the 76.30 area, before black circle wave 3 up set in.

USD - Index Still som way to go in wave 3

It has been some time since I have visited the USD-Index, but it has behaved accordingly to my most bullish short term wave count (see my post on December 15)and wave 3 should still have some way to go before making room for wave 4. I expect wave 3 to end close to 78,47, where it will be 1,618 times longer than wave 1.

In a less bullish wave count we are close to finish wave 1 of one lager degree calling for a deep wave 2 retracement, but that would take a break below 77,38 for that count to become the favorite one.

USD - Index minor wave (iii) under way

The above chart show my very bullish count, if this count is correct minor wave (iii) is well under way an should reach 77.60 before the next smaller correction in minor wave (iv)sets in.

USD - Index minor wave 2 is still in progress

Wave 1 found its top just above 76 yesterday and we are currently tracing out wave 2 Which ideally will end near the 75.14 - 75.20 area (the two pink lines).
From here the next powerfull rally in wave 3 should be seen.

Wave 3 should take out the important resistance at 76.82 without much trouble. A break above 76.82 should be the bears last barrier of hope.

USD - Index The bottom is in place

For the last couple of days we have been following the USD-index closely, at we where closing in on the bottom. I was a bit tricked by wave ii, but if resitance at 75.09 we could say, with a great deal of confidence, that the bottom was in place. After the very positive employment report friday, the USD-index as easily as nothing broke above the 75.09 resistance confirming that bottyom in place.

As can be seen on the chart above we still misses one more rally before wave 1 is done. I-m looking for a rally to just above 76 followed by a wave 2 correction to 75.48, but as this will be wave 2 the retracement could become deeper and head for the 74.95 -75.15 area.

The rally in the USD-index should put pressure on the stock indicies and commodities in the comming days.

USD - Index relabling

The prolonged sidways action since the 74.26 low does not fit into a five wave fall, therefor I have relabeled it to a double zig-zag where wave B is just about to end.
I still expect one last decline to near the 74.00 area, before the bottom i s finally in place. Only a direct break above 75.10 would alter that view.

USD - Index one more decline towards 74.00 is still needed

The quick break back below support at 74.38 indicated, that the bottom was not in place yet and the rally was a mer correction. So one more decline to near 74.00 is still is in the cards.

From closer to 74.00 a major rally is expected to begin.

USD - Index the bottom could be in place!

As can be seen on the daily chart we have a clear five wave decline from the top at 89.62 on March 4 2009. What I have been trying to do is pinpoint the finanl bottom. On monday i said that we needed one more decline closer to the 74.00 area.
I have made a purple box around minor wave v down in the larger degree C wave, as this is the part which is interesting - Lets take a closer look.



On the 30 minute chart we again can see a clear five wave decline from the top at 75.57 on November 27. So the most important element of the Elliott wave theory has been fullfiled.
With a low at 74.26 we didn't get a new low below 74.17 closer to the 74.00 area, but that could have been a truncated wave v.
The important part is what comes after the low at 74.26 - Lets take an even closer look.



At the 5 minute chart we can see a five wave move higher from 74.26 to 74.49. The wave (iv) part was interesting, but wave (iv) did not overlap with wave (i) keeping the possible wave i interpetation alive. What we need now is a powerfull wave iii higher towards at least the 74.77 area, which is where the medianline of the red Andrews pitchfork is located and a break above here would call for a move closer the 75.00 area.

Of cause this could only be a correction, but then we should soon see a break below 74.38 and a last run towards the 74.00 area.

If this is the bottom for the USD-Index, then we should soon see the stock-indicies start thier declinces.

USD - Index close to its bottom?

As can be seen on the daily chart we have had a nice five wave rally down from 89.62 ending wave c of [B] in a flat correction. That means we will soon see a the powerfull wave [C] take off. Wave C do have wave 3 personalities, so this is not the wave to mess around with.

I have drawn a Andews Pictfork defining black circle wave 5, look how the center (median) and upper lines define the entire black circle wave 5 down move. If my count is correct we might need one more stabe at the center line close to 74.

Looking at the internal relations between the waves:

Black cirkle wave 5 will equal black circle wave 1 at 74.34
Black cirkle wave 5 will be 0.618 time the lenght of black circle waves 1-3 at 74,37

The low on November 26 was 74.17 so this target has been fulfilled.



As can be seen the move down since November 3 from 76.82 do look like and ending diagonal missing the final part down in wave V. Idealy it should move below 74.17, but not below 73.88 as wave iii may not be the shortest. So even at the current level at 74.53 a long USD-Index position will make a low risk position, as the stop can be placed just below 73.88 makeing it a less than 1 percent risk trade.



On the 5 min. chart I have drawn in a lower pink line which marks the absoult bottom at 73.88, which must not be broken or my count is wrong. I have also drawn a upper pink line at 75.19 (low of wave (i) as any break above here will confirm that the bottom is in place.

During the next couple of hours we could see a move up to the 74.90 - 75.05 area before the last leg lower closer to 74.00, but we are close to a bottom and don't need much more before the bottom is in place.