Yesterday I showed a potential head and shoulders pattern on the dollar, which gave rise to the possibility of invalidating the main count on the chart which has us in wave iv of the first impules wave up from the low at 80.085. You can see yesterday's post here.
In the absence of an impulsive move up, the risk of further downside remained, in my view. Well, we may have had a 5 wave move up (it could still be incomplete even though I've put the 5th wave label in) with the dollar bouncing right at the neckline of the head and shoulders instead of breaking below it. Here's the updated chart:
Dollar 25 min chart:
If its right that we have completed, or are in the process of completing, 5 waves up from the low at 81.192, which I'm labelling wave [1] of v up, we'll have to expect a wave [2] retracement. The critical level to watch for this will be the low at 81.192. That must not be taken out, otherwise, something else is going on with the count.
If things are very bullish, this move up may just extend and if it does, it may be that it ends up being the whole of wave v, not just part of it as I'm currently labelling the move. That's something to look at if it happens, but the level to watch would still be 81.192.
I'm continuing to count the decline from 83.016 as wave iv of (i) up from the 80.085 low. Its possible that that high was actually wave (i) and this retracement to 81.192 has been wave (ii) and I may have to make this the main labelling at some point, for example, if the next rally starts to look like a 3rd wave up rather than a 5th wave of one lesser degree. For the moment, however, the retracement didn't do anything to invalidate the wave iv count, so I'll stick with it.
I've left the pitchforks that I've been following on the chart for anyone interested.
You can see how the drop to the neckline of the head and shoulders was also the median line of the red fork. That low enabled the drawing of the green fork. The wave I've labelled as wave (1) of [1] hit the upper line of the red fork, fell back from there but was unable to get down to the median line of the red fork, which was bullish. It then rallied up above the red fork, paused at the median line of the green fork, then bust up through it to the upper line. All good stuff.
