12:09 GMT - Dollar Update

If we're in a developing impulse wave up from the low at 75.631, as I labelled the 15 min chart in my last post on the dollar (see here), then if this updated labelling is right, I'd expect to see a big move up in the dollar pretty soon:

Dollar 15 min:

If that doesn't happen then I'll begin to doubt the labelling, although the count for a potential impulse may still stand, provided we don't take out the low at 75.631, of course.

As I said in my last post on the dollar, while we're below 78.273, the risk to the downside is greater. Breaking above that level is vital for the bullish case (though it doesn't preclude bearish counts and more downside, as to which, see the dollar page).

Here's the 95 min chart:

Dollar 95 min:

As you can see, we're at the top of the resistance area  (delineated by the red lines on the above chart) shown on the daily chart in my last post. An impulsive and significant break above this area would certainly inspire confidence in the bullish case, provided it then becomes support. Failure to break above it would not look good for the bullish case.

8:25 GMT - Dollar Update

Last time I posted the daily chart of the dollar, it looked likely that there would be more downside before we could really start thinking that a low may be in on the overall bullish count (see the post on 30 October 2010).

We did get the new low that was anticipated and this has resulted in some nice looking bullish divergences on the indicators in the daily chart:

Dollar Daily:

As you can see, as price made a new low, the indicators shown all made higher lows. This suggests that there is a good chance that we may have seen a low of some sort.

However, despite the dollar's comeback over the last couple of days, there's still alot it has to do to prove that a low is in.

As you can see from the daily chart, we're back into the yellow resistance area I've highlighted in previous posts of this chart. We need to break above it and turn that area into support in order for the bullish case to have any prospect (though doing so wouldn't preclude more downside, so wouldn't be conclusive that the dollar has bottomed). If that can be achieved, the next thing to look for would be a break out above the downward sloping price channel that has formed during this decline.

As a follow through to the bullish divergences in the indicators, we now need them also to get to bullish levels along with a good move up in price: the RSI above 50 and up to the 66.67 level; the MACD above the zero line and the stochastic up to the 80 area. I don't want to see this happen with price only moving sideways - that, in my view, would be a warning of potentially more downside to come.

Here's a 95 min chart showing the move down from the high labelled B on the daily:

Dollar 95 min:

The red horizontal lines show the area of resistance highlighted in yellow on the daily chart. 

The high at 78.273 is key to the bullish case. It has to be broken above on the bullish case. However, doing so wouldn't mean that the bullish case must be the one playing out. If the next significant pullback were to stay above the low at 75.631, we might then have more reason to believe that a bottom has been put in.

Here's a 15 min chart with a potential wave count for an impulse off the low at 75.631:

Dollar 15 min:

It looks like we may still be in wave (5) of [1], but a significant break below the green channel would suggest that its over and we'd then be looking to see a three wave pullback that stays above 75.631 if the bullish case is playing out.

So, while we're above 75.631, the bullish case has a chance, but we need to break above 78.273 if serious consideration is to be given to the possibility that we've bottomed on this count. While we're below 78.273, further downside remains the higher odds option.

You can see the bullish and bearish counts I'm watching on the updated dollar page.

13:30 GMT - Dollar Update

Here's a possible way to label the move in the dollar since my last update on 30 October. This 80 min chart is updated from that post:

Dollar 80 min:

A possible ending diagonal for wave (v) of [v] of C  which would be a truncated wave (v)? Well, its worth considering, though bear in mind, it could be a leading diagonal for wave i of (v).

If the alternate count on the above chart is playing out, then this diagonal may be (C) of [Y] of ii with iii up now about to start. This 15 min chart updates the 10 min chart in the last post:

Dollar 15 min:

Taking out 78.273 would mean there's a very good chance that we've bottomed on the dollar. While we're below that, the risk of further downside is high.

12:12 BST - Dollar Update

Since my last post on the dollar - see here - its moved more consistently with the more obvious count I felt might be playing out at that time, requiring a further low to complete wave C of (2) on the overall bullish count.

Here's the daily picture:

Dollar Daily:

You can see that in the last post the technicals suggested some upside to come, but with the main wave count I had, it seemed likely that this upside would be in the context of what I would label as wave (iv) of [v] of C of (2).

Looking at the updated daily chart above, we got the move up in the indicators and some upward movement in price. Price moved above the yellow highlighted area of congestion which is the area shown on the daily chart from the last post. This was bullish. However, it then moved right back down again - bearish. It then moved back above it - bullish. By yesterday, it had moved back below it - bearish. 

This oscillating action would be more obviously consistent with a correction so I think that has to continue to be my main count for this overall bullish count for the moment. This means that we should see a new low below 76.144 at some point soon.

The indicators currently seem to confirm the possibility of a further decline. As I've noted on the daily chart, the RSI failed to make it above 50, the MACD histogram has been printing lower high bars, the MACD suggests it could be about to roll over and the stochastic failed to get to overbought and is now rolling over.

Here's the 80 min chart showing how I'm labelling wave C from the wave B high at 83.522:

Dollar 80 min:

Of course, we may still be in wave (iv) which could be forming as a triangle, with the decline into Friday's close being the d wave, so there could be another move up to come before wave (v) gets going.

I think if we take out the high at 78.273 at this stage, I might start thinking that 76.144 marked the end of wave C and (2) on this overall bullish count, as shown by the alternate labelling on the 80 min chart. Certainly, if we do that without taking out the low at 76.709, it might well become a distinct possibility. Here's how I would count the move up from 76.144 as the start of wave (3) up if that low marked the end of wave (2) down:

Dollar 10 min chart:

You can see from this chart why I've said above that if we rally above 78.273 without taking out the low at 76.709, the case for a bottom at 76.144 might well be strengthened.

Even if we drop below 76.709, it may just mean that we're still in wave ii, but we'd have to stay above the 76.144 low of course, to keep this alive.

So, taking out the low at 76.709 is going to suggest that the main count, for a new low below 76.144 is on the cards. If we fail to take out the 76.709 low but instead rally up again in 5 clear waves and take out the high at 78.273 the case for a wave (2) low at 76.144 would gain strengh, but it wouldn't be conclusive - we'd have to see whatever low we rally from above 76.709 hold on the next pullback.

13:05 BST - Dollar Update

On the daily chart of the dollar you can see how stretched the bullish count is becoming, with intermediate wave (2) now having retraced nearly 88.6% of the intermediate wave (1) rally:

Dollar Daily:

You can see from the indicators that there are bullish signs appearing - bullish divergence in the RSI which is failing to make lower lows with price; bullish divergence in the MACD histogram; the MACD itself starting to show signs of turning up; and the stochastic turning up. However, this is the type of thing we've seen before, but we now need price to confirm that something bullish may be afoot.

Well, we saw something along those lines yesterday. The bar yesterday was a nice reversal bar with potentially bullish implications since it took out the prior bar's low only to then close above the high of the prior bar. Its a start, but its not conclusive of a meaningful turn - the close was right at the bottom of an area of congestion (see the yellow highlighted area). If the dollar can get above that area and turn it into support, then there might be a more solid basis for thinking that a potentially significant turn has been made.

As mentioned above, we've nearly reached the 88.6% retracement level. I calculate that level to be 75.827, so there's still a little more room to go to reach it, though yesterday's low at 76.144 may be close enough. Just an observation: wave [2] on this bullish count was a 78.6% retracement of wave [1] and .886 is the square root of .786. It would be interesting if wave (2) of [3] stopped at the 88.6% retracement level.

The case for a turn would be reinforced if there were a a potentially complete wave count.

Well, there may be, but the most obvious count to me suggests that we may still need to see another low. Here's a 90 min chart showing the move down from the June high at 88.708:

Dollar 90 min:

The count places us currently in wave (iv) of [v] of C. If this is correct, Friday's rally will be limited and we should see a further decline next week to complete wave [v]. 

Here's a closer look from the B wave high at 83.522:

Dollar 70 min:

This provides a bit more detail for wave C of (2). Within wave [v] of C, I've got an extended wave (iii). This should mean that wave (v) of [v] is unlikely to extend and, in theory, should tend towards equality with wave (i) of [v]. Wave (i) of [v] was 1.071 points on my labelling, so if we start dropping again, without taking out Friday's high at 77.131, I'd be looking for signs of a turn in the 76.060 region.

Having said all of that, with Friday's action, its very possible that wave C completed at Friday's low. You can see the alternate count I've labelled for wave [v], shown in italics.

I'd start to think that this alternate labelling is playing out if we were to break above the area between the red horizontal lines, which is the yellow area of congestion marked on the daily chart above. This is, of course, provided that that area then becomes support.

Such a move would also get us above the 200 period moving average, which would also be supportive of a possible turn.

Still, looking at the 5 min chart, this is what I see from the low at 76.144:

Dollar 5 min:

Close up, the move from the low doesn't seem to be as impulsive as it may have felt if you were only watching price action and not the charts. It counts more naturally as a corrective move in my view, consistent with the main labelling in the 70 min chart above. However, I've sketched in a possible leading diagonal from the low that may have played out for the first wave of something more bullish. There's no overlap between what I see as the 1st and 4th waves, (they'd be where I have waves (1) and (4) of wave [C] on the corrective count) so I'd consider it doubtful. Still, if price breaks above the congestion I've referred to above and turns it into support, this leading diagonal count would start to look much more convincing.

So, as I've been emphasising over the last few weeks, the key remains price behaviour. Until we see price action that is undoubtedly impulsive to the upside, the safest course continues to be to assume more downside to come.

This is especially important because there remain more bearish counts in play. One of those is mentioned as item 2 on the Dollar page - that page is considerably out of date now, but the count mentioned in item 2 remains on the table (see the numbered items under the 75 min chart - item 1 in that list warned of much further downside than we had seen at that time in the count shown in the above charts).

A less bearish alternative, but one which, nevertheless, implies possibly more significant declines to come is shown in the following chart:

Dollar Daily - Alternate overall bullish count:

This puts us still in primary wave [2] of cycle c. The low of wave b is at 70.698. If this labelling is correct, and we're seeing an expanded flat wave [2], we could easily take out the low that's considered on the counts above to be wave [2] and which is wave (A) of [2] on this count, at 74.170. 

This count would likely be ruled out by a move above the low I've labelled as wave 1 of (C) at 80.085, assuming we move above that level in the next rally, since, on this labelling, the next rally would be wave 4 of (C).

So, in summary, I'm thinking we're likely to see more downside some time next week before we complete wave [v] of C of intermediate wave (2) on the main bullish count. If we move above the 77.931 level in an impulsive manner, I'll start to think that we may have bottomed at Friday's low of 76.144. However, we'd have to see that area turned into support to gain more confidence in this possibility. Bear in mind that on the more bearish counts, its possible that a rally from around these levels may only be a 4th wave in a larger 5 wave decline from the June high. Taking out the low at 80.085 would make that less likely on the alternate bullish count shown above, but we'd have to take out the high at 83.522 before I would start to think that the even more bearish count referred to above (that has the June high as a C wave and puts us now in a very large 5 wave move down) may not be viable.

12:31 BST - Dollar Update

The dollar made a new low this morning. I was expecting a new low as you can see from the update I did on Saturday, but because we retraced up quite deeply first, I've relabelled the charts to show the wave (iii) of [v] low at Friday's low (instead of that low being wave iii of (v)), with the retracement up being wave (iv) rather than wave iv of (v):

Dollar 60 min:

Here's a closer look from what I now have as the wave iv of (iii) high at 79.020:

Dollar 5 min:

As you can see, we may be near to completing wave (v) down, provided it doesn't extend. It looks to me like one more low is required to complete 5 waves down from the wave (iv) high at 78.687. If that's right, the monitoring process for a potential impulse move up will resume then.  If we fail to make a new low but instead rally above 78.365, it'll start to suggest that we may have bottomed at the current low of 77.975.

However, be aware that the 78.6% retracement level is at about 77.300 and price may well be headed there. Having said that, currently, wave C is about .618 x wave A and also, wave C is about 1.618 x wave B. That would be an intersting relationship for an end to wave C. 

As I mentioned on Saturday, to have any confidence that the decline may be over, we need to see a 5 wave rally, followed by a 3 wave decline that stays above the starting point of the rally. We then need a further 5 wave rally followed by a pullback that stays above the high of the first 5 wave leg up - that's still something that we haven't seen.

You can see on the 5 min chart how we failed to see that following Friday's low - the first 5 waves up which could have been the first wave in an impulse is the leg I have labelled as [A] of a of (iv). A 3 wave retracement to where I have [B] of a of (iv) followed. We then saw another 5 wave rally to where I have [C] of a of (iv). The crucial thing at this stage for an impulse was for the subsquent retracement to stay above the high at [A], which it failed to do. That was the first sign that the possibility that I had mentioned on Saturday that Friday's low was the end of wave (v) was unlikely.

The next sign of this was when we rallied above the high at a, it was possible we were in a one-two-(one)-(two)-(three) up. However, taking out the high at a on the next retracement ruled that out and increased the likelihood of a new low.

So, as mentioned above, I'm expecting another low below 77.975 to complete wave (v) of [v] and C. Then I'll resume the process described on Saturday and above, of looking for signs of an impulse move up, beginning with a 5 wave rally from the new low and a 3 wave pullback.

If we rally now without making a new low and take out the low at 78.365, especially if it occurs in a clear 5 wave move up, I'll start to think we have already seen the end of wave (v). I would then want to see a quick move to take out the highs at 78.687 and 79.020.

11:04 BST Dollar Update

The dollar is starting to look again like its completing 5 waves down from the high I have labelled as wave B on the overall bullish count. Here it is in the 80 min chart showing the move down from the June high.

Dollar 80 min:

At the low on Friday, wave C is about .618 x wave A.

Here's a closer look from the high labelled B:

Dollar 60 min:

Obviously, in a strong downtrend as we've seen in the dollar over the last few months, its always going to be difficult to identify the end of the move. We can only label it as best we can to find potential high probability turning points and see if it holds.

Here's an even closer look from the high labelled (iv) within the wave I'm labelling as wave [v] of C:

Dollar 5 min:

As you can see from this chart, I think we need a move up in wave iv and then a further decline in wave v to complete wave (v) of [v] of C. However, it is possible to count wave (v) of [v] complete or just about complete at Friday's low, as you can see from the alternate labelling.

Non-one knows, of course, if we've bottomed. We just need to see some price action that might suggest a low is in place (I'm assuming that the overall bullish count is playing out).

As I've said many times before, the initial sign of a low will be a strong impulsive 5 wave move up followed by a 3 wave pullback that stays above the low. We then need a further 5 waves up that holds above the high of the first 5 waves up. Its been at this point that previous potential impulse moves up have failed - they've failed to hold above the high of the first 5 waves up. This has been the warning that further downside was possible because it has meant that we're left with either a 3 wave move up (obviously, corrective) or a potential one-two-one-two count forming. In a downtrend as we've seen, its better to give the benfit of the doubt to the downside in this situation.

So, for the moment, I'm assuming that the next bounce will be wave iv of (v) of [v]. However, if we were to take out the wave i of (v) low at 78.703 I'd have to start thinking that the alternate labelling is playing out and that Friday's low may have marked the end of wave C.

16:26 BST - Dollar Update

On the overall bullish count which has us currently in a wave (2) decline in the dollar, we've just about reached the 78.6% retracement of the decline from the June high and the point where wave C is .618 x wave A:

Dollar 80 min from June 2010 high:

Coupled with the above, there's a not unreasonable count for a complete 5 waves down from the high labelled B. Here's a closer look:

Dollar 60 min from B wave high at 83.522:

However, remember, the trend is firmly down. Until we see something clearly impulsive to the upside, the risk of further declines remains - we may have more to go in wave (v) of [v] of C or, perhaps we may only have seen the first wave of wave [v] within C, for example. The latter isn't ruled out until we take out the wave [iv] high at 80.259.

So, the low at 78.414 is critical to this labelling showing wave C of (2) as complete and the labelling has to be tentative until we see some price action that is decidely bullish (don't forget, there are more bearish potential counts - see the dollar page).

 

12:26 BST - Dollar Update

The dollar failed to hold the low at 80.085 so confirming that wave (2) of intermediate [3] up on the bullish case, isn't yet over. The count that I've been showing as an alternate is now the main count and puts us currently in wave C of (2) on the bearish case:

Dollar 75 min:

You can see that I've labelled it as if we're only in [i] of C at the moment. That might be too pessimistic, but a better time to judge will be once we have 5 waves down from the B wave high complete. At the moment, the decline from wave B isn' t quite 0.5 x wave A. It would be at about 79.200. If it gets there, or, better still, to the 0.618 x wave A at about 78.191 in 5 waves, that would look quite good for the whole of wave C.

I've also noted the alternative on the chart, which I mentioned in yesterday's update which is that the decline from where I have labelled wave B is actually only wave [b] of B, (in the form of a double zig zag) so we'd next get a rally in wave [c] of b.

Here's a close up from the wave B high:

Dollar 60 min:

Once we've completed wave (iii) of [i] of C down (if its not yet complete), then we should get a rally of sorts in wave (iv), perhaps to the 38.2% retracement level at arounf 81.100. 

Anything much above that, especially if we break impulsively above the wave iv triangle and that area of congestion becomes support, would start to suggest that the alternative labelled may be playing out. The other alternative would be  that we completed wave C (the latter would involve some relabelling since currently the labelling assumes we haven't seen a complete impulse wave down from the B wave high - the best solution may then be to label the decline from (1) to A shown on the 75 min chart as 3 waves for wave W, followed by wave X and then 3 waves for wave Y).

23;40 BST - Dollar Update

The dollar's not looking too good on the count that has it in intermediate wave (3) up. Today it has come very close to the low that I have labelled as wave (2) on the bullish count, as you can see from this75 min chart:

Dollar 75 min:

The alternate shown on the chart (its the first of the alternates I've had listed on the dollar page) implies alot more downside to come if that low at 80.085 doesn't hold.

Here's a closer look at how it may be counted on the bearish count:

Dollar 60 min:

If I count wave (E) of the triangle [B] wave as a triangle itself, then wave [C] of y looks like it might need one more low to complete. Its feasible that it could do that without breaching the 80.085 low, so this may be the best count for the bear case at the moment (unless the low is already in, of course).

If it can hold that low and take out 82.780, there's a reasonable chance that it'll go on to take out the high at 83.522. Whether that will be within the context of wave (3) up or whether it will still be the B wave on the alternate count, we'll have to wait and see as price action develops.

14:04 BST Dollar Update

The dollar failed to make 5 waves up following my last post (which you can read here) and continued its decline which, on the bullish count, is wave (ii) within an intermediate wave (3) up. 

I mentioned in that last post the risk that the low I had labelled as wave (ii) could be only wave [A] of y of (ii), which would mean that following a rally for [B], there would be a further decline in wave [C] to nearer the 78.6% retracement level of wave (i). Well we got the further decline and it did just about reach the 78.6% retracement level at today's low of 80.865. 

Here's how I'm labelling it for the bullish count:

Dollar 60 min:

We've now rallied from that low in what looks more like an impulse than the rally we were seeing at the time of my last post. However, that's no guarantee of a bottom since if the bearish counts are playing out, such a rally could simply be part of a corrective move.

So, what we need to see is a 3 wave pullback once this move up completes. (assuming it does so in 5 clear waves). The pullback must stay above the low at 80.865, otherwise the labelling is wrong.

Assuming that happens, we then need to see an even more decisive push up in 5 waves followed by a 3 wave pullback that stays above the high of the first rally leg and then another 5 wave rally. In other words, of course, we need to see a 5-3-5-3-5 larger degree rally. It would be preferable if we could take out the high at 82.987 in this rally, but really we can only take things one step at a time and monitor each rally for 5 waves and each pullback for 3 waves.

So, I'd be looking at a 3 wave move down that stays above 80.865 and a good reversal signal as a sign of another leg up to come, but I'd want to be out if we then drop below either the low of the pullback, or the low at 80.865. Given that continuing downside in wave (ii), or in one of the more bearish counts (see the dollar page) remains possible, its no time to assume that an impulsive looking rally means a bottom has been put in.

10:28 BST - Dollar Update

The risk of further downside referred to in my last update on the dollar (which you can read here) in the absence of impulsive upward movement to confirm a low, played out once again, negating the count that assumed the start of wave (iii).

Here's the 120 min chart showing the labelling for the decline from the June high:

Dollar 120 min:

The bearish count is that the June high was intermediate wave (1) up, and the August low was intermediate wave (2). The rally since is the start of intermediate wave (3) up,

However, note the bearish alternative, which is one of the bearish possibilities outlined on the dollar page.

I've relabelled the 60 min chart to reflect the move since Monday. The bullish count therefore, is that a wave (ii) correction of the rally from the August low at 80.085 is continuing:

Dollar 60 min:

The retracement in wave (ii) has now reached the 70.7% level. You can see on this chart and on the 120 min chart above, that the decline looks like 3 waves. If it did bottom at 80.997, then wave y is about a 1.236 extension of wave w. The move off the low at 80.997, which I've tentatively labelled as wave (ii), is starting to look impulsive. 

However, there remains the risk that the decline from 82.987 is 5 waves and would be only wave [A] of y and we would now be in wave [B] before a further decline in wave [C], perhaps to the 78.6% retracement level.

This risk would only be ruled out if we take out the high at 82.987 in 5 waves. If it happens in only a 3 wave move, there's a risk that even if  the decline from that high is only 3 waves as labelled, all we're seeing is an expanded flat for wave y, where wave [B] takes out the start of wave [A] and then a decline in wave [C] follows just when it seems that the decline is over.

As I've said above, the move up from the 80.997 low is starting to look impulsive, but at present it counts best as 3 waves as labelled. If this labelling is correct, the next decline would be wave (4) so it would have to stay above the wave (1) high at 81.094 for this labelling to remain valid. Taking out that high on the next decline would be a good sign that further downside may be on the cards. It would certainly look best if this assumed wave (4) retraced only to the area of wave 4 of (3) at about 81.466 on this labelling. That's at about the 38.2% retracement level assuming a wave (3) high at 81.767 (I haven't labelled this yet). If we decline much below that in wave (4), I'd start to get suspicious of this move up as an impulse in the making.

If we get a wave (4) and (5) to complete 5 waves up from the low at 80.997, the next thing to watch for is a 3 wave decline that stays above that low. A move below that low will negate the assumption made for this labelling that wave (ii) bottomed there.

So, the three levels I'm watching for now are 81.446, 81.094 and 80.997.

11:44 BST - Dollar Update

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.

 

9:30 BST - Dollar Update

In my last post on the dollar, it appeared that we may have seen the start of wave (iii) up. In fact, the dollar put in a bit more upside from there with what counts quite well as a 3rd wave extension. It then appears to have completed 5 waves up from the 81.876  wave (ii) low, at 82.923. 

Here's a continuation of the 60 min chart from my last post, but zooming in on what I've labelled as a complete wave (ii) correction and the rally from there (you can see a chart of the wider view in my last post):

Dollar 60 min:

I've labelled a [1]-[2] off the wave (ii) low, but wave [2] may not be finished - at the moment, we only have 3 waves up from the wave [2] low. The current decline from the high labelled 1 would be wave 2 (of (3) of [3]) and must stay above the wave (2) low at 82.475 otherwise, the probability will be that wave [2] is continuing down. It retraced 50% of wave [1] at the 82.383 low.  The 61.8% retrace is at about 82.271 and the 78.6% retrace is at about 82.094.

Also, its not conclusive that we've seen the wave (ii) low. We retraced about 50% of wave (i) in the decline from 83.522, buts is perfectly possible that wave (ii) could still be in progress and will go on to make a deeper retracement to the 61.8% or 78.6% levels.

I think it would be more reassuring for long positions if we were to explode up above the correction channel that largely contained wave (ii) (see the red channel lines) and above the green base channel that I've tentatively put in for this rally off the wave (ii) low - if this is an impulse wave it ought to have no difficulty breaking above the upper line of the green channel and not really looking back after that.

Until then, downside risk in a continuing wave (ii) (or the other bearish possibilities outlined on the dollar page) remains. So, the best strategy to minimise the risk is to step aside from long positions if either of the two  pivot lows at 82.475 and 82.383 are taken out - the choice depends on individual risk tolerance.

14:26 BST - Dollar Update

The dollar looks like it may have completed a 3 wave move off the high of 83.522 at yesterday's low of 81.876 - not far off the 50% retracement level mentioned in my last post.

Here's a 60 min chart:

You can see that even on this time frame we appear to have 5 waves up from that low. If we're starting wave (iii) up then holding the low is, of course, crucial, so that's the level to watch for now. 

We need a controlled 3 wave pullback, at which point, I'll be thinking long with a stop below the low of the pullback or the low at 81.876. With the risk of more downside outlined in my last post, I wouldn't want to give this too much room at this stage.

 

12:15 BST - Dollar Update: In wave (ii) down of minor 3?

Here's an update for the dollar (you can see the last update by clicking here and on the dollar page):

Dollar 45 min:

In my last update I was thinking that we had topped in wave (i) of minute [i] of minor 3 up, but there was a possibility that we were still in wave  [4] of v of (i), so I wanted to see the level of 82.717 taken out by way of confirmation.

That level was eventually broken, so my main count  here is that we are now in wave (ii) of minute [i] of minor 3.

I've left the retracement levels for that on the chart and as mentioned in the previous update, I'm looking at a retracement to somewhere around the 50%-61.8% level which is between 81.800 and 81.394.

I've labelled wave (ii) so far as an a-b-c zig zag with wave c probably in wave [3]. Within that wave [3] of c, on a smaller time frame it looks like wave [3] still needs a 4th and 5th wave to complete, and then we'll see waves [4] and [5] of c.

If this is correct, at least the 50% retracement level should be attainable. Its also possible that this a-b-c correction might only be wave w of (ii) and that we will have more downside to a deeper retracement level with wave y. Once I see 5 waves down from the b wave high, I'll be watching how price moves up for clues as to whether or not its the end of the correction. 

Its also possible that what I'm labelling as an a-b-c should itself be an almost complete w-x-y correction, so instead of seeing 5 waves down from where I have labelled wave b, we would only need 3 waves down to complete wave y. On my reckoning, it would be almost done, if not already, and would fall short of the retracement levels I'm looking at.

The only warning of this would be to see what happens after the low in what I would label as wave [3] of c currently. It should be followed by a corrective looking move up for wave [4] and must not end above the wave [1] low at 82.988. If it moves up there, that would be a strong indication that we may have seen an end to the correction. Taking out the high I've labelled as wave b at 83.303 would be a stronger sign that the correction was probably over. However, we'd also have to see a strong impulsive move up  and above the high labelled (i) at 83.522 given that we would be in wave (iii) of minute [i] for greater confidence.

12:15 BST - Dollar Page Updated

I've updated the Dollar page - use the menu tab above or click here.

9:42 BST - Dollar Update - Possible top for wave (i) of [i] of minor 3 and what to look out for

Yesterday it looked like the dollar was completing 5 waves up from the low of 80.085 which would be wave (i) of [i] within minor wave 3. You can read yesterday's update here.

In that update I mentioned the possibility that we could still be in wave [4] of v of (i), with a little more downside to come, provided we stayed above the wave [1] high at 82.717. Well, we have seen more downside and so far, we have stayed above that level, so the possibility remains that we are still in wave [4] of v and will see a further rally soon in wave [5].

The other possibility is that yesterday's high at 83.522 was wave [5] of v and wave (i), ending, therefore, with a slight truncation. You can see both of these possibilities on this chart:

Dollar 35 min:

I've labelled the truncated end to wave (i) as the main count only because we've broken the elliott channel for wave v, whereas, ideally, a 4th wave should stay within the channel. However, if we rally up hard back into it, and assuming we haven't first taken out the 82.717 high, it'll look like the alternate labelling of a wave [4] low at today's low is playing out. On the other hand, a rally back up to the broken channel line that gets rejected will increase the odds that we did top at 83.522.

So, I'll be watching price behaviour at that lower channel line and also watching that 82.717 level. 

Taking out that price level should confirm that wave (i) is in and that we'd be seeing a retracement down in wave (ii) now. You can see the retracement levels for wave (ii) assuming wave (i) topped at 83.522. There's an obvious support area at about 81.800 which is in the region of the 50% -61.8% retracment, the low of wave iv of (i) and the high of wave i of (i). If we're in wave (ii) down, I'll be on the lookout for a sign of an end to that wave in that area.

 

13:04 BST - Dollar Update - Nearing 5 waves up from 80.085?

The dollar index looks like it may be in wave [5] of v of (i) up from the low at 80.085. You can see from the elliott channel I've drawn in that a possible target for wave v could be the upper line of the channel which is at about 83.780-ish, depending on where wave v hits it. That's also about where wave [5] of v would be about equal to wave [1] and about where wave v would be approximately 1.236 x wave i:

Dollar 30 min:

 

Of course, its possible that wave [4] of v is still playing out, in which case, we'd see more downside before wave [5] kicks in. That's just something we'll have to watch out for.

If we are completing wave [5] and wave v and wave (i), we're going to get a pullback in wave (ii) next which could be steep. We'll just have to wait and see, but the wave count suggests that the next tradeable move could be to the downside.

12:09 BST - Dollar Update: 25 min chart

Just a quick note on the dollar to update the position since my last post on it which you can see here.

Dollar 25 min:

I've labelled Friday's high and the subsequent pullback as waves (3) and (4) of wave [3] (wave (4) may still have more downside to go even though I've put the label in). If this is correct, then wave (4) musn't end within the territory of wave (1). The high of wave (1) is at 82.610.

At the moment the count looks good, but we need to watch that level in this pullback.

If the count is correct, we need a wave (5) up to complete wave [3]. I would expect wave (5) to try to get back to the median line of the green fork (which it did in wave (3)), but potentially fail to get there, which would be bearish near term and consistent with a wave [4] retracement. On a wave [4] retracement we'd then need to watch the high of wave [1] at 82.717 since wave [4] must not end below that high.