Following on from my last post on the dollar (which you can read here), assuming we have seen wave [1] of i of (iii) up from the low at 81.876, the risk of further downside in wave [2] played out. We've now retraced just over 78.6% of the wave [1] rally. Its possible to count a complete correction at today's low. Here's how I can label it:
Dollar 60 min:
Its interesting that we bounced off the lower line of the correction channel for wave (ii). On a smaller time frame, its possible to count 5 waves within C of (Y) at the low of 82.055, but its also possible to count it as being now only in the 4th wave, with one more low to come. If there is another low to come, then it obviously has to stay above the low at 81.876, otherwise this count is invalidated and, as pointed out in the last update, it will appear that wave (ii) is continuing to lower levels - the 61.8% or 78.6% retracement of wave (i).
I've drawn in a new base channel, assuming we've seen the low of wave [2]. If going long, you wouldn't really want to see this channel broken to the downside, although false breaks can, of course, occur. Still, if I wanted minimal risk, I'd use a break of the channel as a signal to exit a long. Technically, however, the level at which to stand aside would be below 81.876.
Once again, if we've bottomed in wave [2], then we'd have to see price behave in a manner that is consistent with wave [3] up. As long as it fails to do so (like the 3 wave rallies it was putting in following my last post), the risk of further downside remains. While that may be limited if we're in wave [2], its potentially alot greater if we're actually still in wave (ii), so sensible stops are, as always, vital.
