Thursday, 29 July 2010

10:18 BST - Dollar Update

Still looking for that potential low in the dollar. On 27 July, it looked like an ending diagonal was forming for wave [v] of C of intermediate (2). Its still looking that way. You can see from the chart below that I've shown a possible end to wave (2) at today's low of 81.664. However, wave (v) of the diagonal could go as low as 81.177 if the labels are correct. Beyond that, wave (v) would be greater than wave (iii) and that would invalidate the diagonal, so something else would be playing out.

Dollar Index 60 min chart:

If you were to take a long position now, you'd have a nice tight stop, just below the current low, so it may be worth a punt. However, if the diagonal is playing out and has ended, we really need to see an impulsive move to the upside that gets above the wave (iv) high at 82.381. If it does that, a three wave pullback (that obviously does not take out the lowest point of the diagonal) would present a safer entry. Until then, the risk remains to the downside, so caution is required on any long trade.