Remember: Nothing moves in a straight line
Now about the technicals:
DXY fell sharply last week in a fashion that has happened once a few month since its big rally, which mainly shows profit taking by the bulls and often takes less time than the previous impulse. In this manner DXY has acted more like the stocks in the time of their crashes. Showing devastating bear moves and hunting for stops.
Whether or not the bears are done is not clear but I have stacked a good team of high probability indicators to get long:
- We've hit the previous big support from the previous crash in USDJPY and bounced.
- We're very close to the of the whole 5 wave move to the upside.
- We have a pretty well-respected that we've just hit its 1.5 warning line.
- An A=C move has just terminated.
(This way I would be more sure of my position because we'd have a higher high.)
I've put my initial stop at the next support. Hitting there wouldn't void the setup but this is much better than putting it below 116.00 handle simply because there will be too much risk to take.
The profit Target is the least I'm looking for; a new high, if the analysis is correct.