Many financial instruments are either positively or negatively correlated and the price action of these instruments would reflect the recent strength in Dollar as represented by DXY Index.
Due to almost vertical move in DXY since May 2014 low, has lead many to think that Dollar is so strong that it would just continue in parabolic rise without even normal retracement.
I accept that everything in the public domain in terms of fundamentals suggest that Dollar (DXY) should continue to attain much higher levels which is feasible and in that case we might only get a retrace before continuing higher.
However, there are many factors at play and often very hard or near impossible for us as retail traders to weigh all these and give correct scoring to arrive at a specific level on back of that. But many things could come right out of the blue and seemingly unexpected like the SNB dropping the peg with EURUSD.
It is very probable that the BOJ's QE has possibly been used by many leveraged funds investing in USD and this could prove to be a potential problem, in that if this was to reverse the tide will turn and could be major catalyst for initiating USD weakness. In fact even Japans Authorities have acknowledge that the weakness in YEN and particularly the speed is not justifiable by fundamental. They also seem to think that Leveraged Funds are the real reason for the pace of YEN weakness.
Regardless, whilst it not possible to state that this will be a major top (though I think it is very likely), at least is now due for normal retracement. If it is to retrace then normal 50% -61.8% of it's rise since May 2014 is to be expected.
Reasons for possible topping (intermediate or reversal) zone are:
1. It has almost retraced 50% of the move from 2001 high to 2008 low and other fib clustering in the region of 93-94. 2. Has reach the upper extremity of the rising trend channel from 2008 low. 3. The move up from April 2011 low appears to be an ABC Zigzag. If correct, then wave C of the zigzag is now nearly complete with minor 5 waves clearly visible. So even if it make new higher high from here this would be completing the final wave v of 5. 4. ADX is fully extended and is approaching 58 on weekly chart with 50-60 often considered the upper limits of the ADX. 5. +DMI is showing potential divergence with price suggesting buying pressure is weaker compared with the previous high in this cycle. 6. On daily chart (see image below) RSI divergence is clearly visible and the last gap up at 91 could be potentially an exhaustive gap which normally appears towards completion of the cycle. 7. Possible time symmetry (see monthly chart) suggest that Jan 2014 is very significant month.
If we have the anticipated retracement or reversal in DXY, then to varying degree this would be reflected in all USD related assets such as Oil, Gold & Silver etc and USD Currency Pairs.
Hence any bullish trades based on USD strength should be managed well so as not to be caught on the wrong side.
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Possibility is there but it is supported by rising momentum you would expect in wave 3. I note for now RSI divergence on daily. That could fail and DXY could explode to the upside as per your counts. But I am not convinced, I think a retracement is minimum that needs to be seen before new swing high in wave 3 could develop.
hussain9
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yeah sure . always the 3rd wave gives the highest in MACD which is obvious in daily chart and we didn't break the 50 MA daily yet to start a correction . we will just relax and watch where it is going to end .
thanks for your fast reply and comment .
DanV
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Agreed. YW
hussain9
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hussain9
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Thanks a lot . how about this possibility :
DanV
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Well the wave 1 on your chart is commonly put forward as wave 1. I am not convinced as the price action lacks that impulsive structure even if as many we assume it is a leading diagonal. So in my view it fits better as wave a with the wave 2 on your chart as wave b.
But as alternative what could develop is that the move of the May 2014 low become larger wave 1, we have retracement as wave 2 and then 1 -5 wave cycle that could conclude much higher as you are suggesting. I am not dismissing that possibility right now.
The focus is on retracement at the minimum and the nature of that retracement would give clue for future price action. Hope this helps. Thanks for your question ans sharing your chart.
hussain9
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thanks for your comment .
DanV
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YW
Ansari
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hi DanV,many thank's.
very nice.
my target is fib 50%(95.87)