USDX Ending Diagonal Update

 

The USDX may still be completing a B leg of its fifth wave. For this count to stay valid however a sharp move upwards will need to occur very soon, probably within the next session. Price will ideally stay above 8015, and because wave 1 is greater than wave 3 by price, wave 5 needs to be shorter, so wave 5 should not push above 8210.

US Dollar Index 4 Hour Chart

 

Here is my Ending Diagonal count for the USDX. I think there is one more leg up left to go before a big retracement happens in line with overall US Dollar weakness. As the price of the EUR/USD comprises of 57.6% of the USDX, I expect the final move up will correlate with a spike down in the pair.

USDX Channel about to break?

 

Here is a chart of the channel that has played such an important role containing the USDX over the past 4 days. Price movement has just bounced sharply off the bottom of the channel and I am hoping it may push through resistance from here. A break above 8020 will take price above the resistance line. If this is the case it is a good indication that the correction is over and there will be more upside to come. Look to short the NZD, AUD, EUR and GBP against the USD if price breaks above the channel.

USDX Possibilities

 

Above is a bullish USDX Chart. A break above the downward sloping resistance line will be a very bullish sign, and will likely signal the end of the correction.

Above is a short term bearish chart. Price has stalled at the 61.8% Fib of the sharp move down and the intensity of the rebound from 7966 has shown little follow through. It is possible the USDX will fall to another low before continuing with the longer term trend.

USDX at Resistance

 

A break about resistance in the USDX should confirm the end of the correction. Look to get short on the EUR. GBP, NZD and AUD vs the USD and JPY. I expect US dollar weakness against the Yen over the coming sessions so shorting JPY pairs may pay to be even more lucrative than USD pairs. I have also taken a short in Gold which is going to be a longer term hold.

*** EDIT *** Seems I spoke too soon. Seconds after I posted this rumours of a possible bailout for Greece were leaked sparking a wave of USD and JPY selling. I have already taken positions in several trades and I am going to hold them. I do not expect this rally to last.

USDX 15 Minute Chart - Is the Correction Over?

 

Here is a possible count in the USDX which shows that the correction may be complete and price is about to head higher. As you can see price is bouncing off support and has not broken through it. I am going to start looking for opportunities to short in the AUD, NZD, GBP and EUR against the USD and JPY.

Bias Change?

If the US Dollar index drops to a new low and the EUR/USD and AUD/USD push through to new highs my dollar bias in the short term will change. It can be an expensive exercise  sticking to an incorrect bias and stubbornly refusing to believe that your original analysis was incorrect. We can't win every time.
Overbought readings have dropped back due the the consolidation of the past 10 or so days so a new high is a possibility. The proximity to recent highs/lows in the aforementioned indicies mean that breakouts are a distinct possibility. I hope the tops are in but right now I am not so sure anymore..

Invalidated Counts

Recent Triangle Counts for the USD/CHF, EUR/USD, and US Dollar Index have all been invalidated. I will post new charts tomorrow when the count becomes more clear. The Euro and Swissy have lost a lot against the USD however the Pound and the commodity currencies seem to be holding up against the USD strength.

US Dollar Index Hourly Chart Update

Here are the 2 scenarios I believe are most likely for the USDX.

There is a distinct 5 wave (impulsive) move up as shown in the charts. That implies that the move is most likely either the beginning of the next leg up, or a C leg of a corrective pattern. My charts for the USD/CHF pair are almost identical to these also. There is also the chance that these pairs are forming a triangle (see today's USD/CHF post).

US Dollar Index Hourly Chart Update

This is my current count on the USDX. Although there are several possible counts at the moment, this is what I speculate is underway. I expect a retracement to at least the 7580 level before further upside. I am fairly confident that the wave 1 impulse I have marked is correct. Robert Balan states: "The normal retracement of an irregular correction is 38.2 percent from the orthodox end of the adjacent impulse wave," and wave C of the irregular flat finishes almost exactly on the 38.2% Fibonacci of the entire first impulse.

US Dollar Index Hourly Chart

Here is my view of the Dollar Index. Wave 1 is equal to Wave 5, there is alternation between Waves 2 and 4, and C of Wave 2 is exactly 61.8% of A of Wave 2.