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Dollar sits on the fence after Yellen speech. Looks like it will be up to the base currencies or Yen to make the running today.

 



 

 

 

 

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Just because Mercury is in Bali on holiday does not mean you other Elliott Wavers can slacken off! 

DX daily still in shock, can really only start eyeing up those support levels immediately below.

 



 

 

 

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Morning all IG forum heads!  Rumours that I was on a beach in Bali are...  absolutely correct.  Always wise to take a solid break now and then to recharge the batteries and get a different perspective.  Prior to flying out I closed out all my Stock indices and commodities trades, although I took a cheeky Copper short to good effect during the break.  I did not close my FX positions however and am glad I didn't.  I'm focusing on FX just now while the stock markets clarify whether they will deliver a CB induced all time high or not and who knows what is going on with Oil (all too dangerous for me just now).

 

So to kick off my holiday musings I thought I'd start with DX, and when I say start I mean right back at the beginning.

 

On the monthly chart I see a clear A-B-C retrace to July 2001 high followed by a 1-5 motive wave to Mar 2008 (credit crunch drop action taken by Fed).  At this point it is impossible to see whether the current rally is another A-B-C retrace or a motive (1-5) wave but for now that doesn't matter as all roads lead up, it would seem.

 

Zooming in on the Weekly, sorry it is a bit indistinct but I am really only showing you the tramlines, which have been pretty well respected so far.  The Wave 4 (pink) retrace occurred at the Fib 38% (off the start of Wave 3).  If the market is now in a wave 5 (to wave C or large wave 3 as yet unclear) then how high will it go is the next question?  Tramline of Fib 76.4%?

 

Looking now at the Daily, for me there is strong support for the case that the Wave 4 (pink) is concluded with 2 triangle formation breaks and kiss backs, the latter on a support zone, plus that Fib 38% and strong Pos Mom Div between the A and C of the last move down to Wave 4 (Pink).  For EW people this also looks like a complex retrace but could also be a simple one (red label alternative) but that is purely academic as the result is the same.  Wave 4 in now on to wave 5 up.  To cap it the kiss back (Blue 2) was on the 62% Fib, in the support zone with a strong bounce away up.

 

For good measure the 4 hourly chart shows strong Pos Mom Div at Blue 2 and on the hourly chart we see the same.  Now we may have had the 1-2 wave (green) of the larger wave 3 (blue) with a retrace to 38% Fib.  However the 50%/62% are the more common retrace levels so the chances are a further pull back could occur.

 

So what to do?  If you believe, like I do, that DX is going up the key is to find a low risk entry point for a Long.  Just now (6am - jet lag is a biach!) a Long with a stop just below the recent low (at the 38% Fib) costs 23 points, A decent bet for me with other indicators favourable.  Failing that wait to see if it pulls back further but the age old dilemma of missing out on the run comes into play here.

 

Ya pays yer money ya takes yer choice.

 

Charts:

 

 



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Hi   Good to hear you enjoyed a fine restorative break.

The DX has been in a strange mood just recent after the S&P head and shoulders pattern failed and then went on to challenge the highs again. Both stocks and currencies seem to be in wait mode but Yellen doesn't look about to do anything anytime soon. GBP has been flying about on steroids and untradeable for some time now. The air has that expectant feel like when a tropical thunder storm is about to break, but when?

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All true  but I have managed to trade the GBP/USD successfully by ignoring all that and sticking to my analytical method.  I am heavily short GBP/USD and stop protected for zero loss as a result and expecting this market to continue on down in the run up to the BREXIT vote.  Having said that I do anticipate a relief rally for a while before another sharp drop.  It is open to volatility risk of course so not for the fainthearted and a big decision lies ahead, to cash prior to the vote or let it ride.  At present I am leaning towards cash but maybe I will leave a little in, depends on how the market evolves from here.

 

What is more interesting perhaps is EUR/USD.  I believe as the vote approaches more people will get worried about the impact of BREXIT on the Euro, rather the GBP.  I am heavily sort EURUSD also and just topped up at 4am this morning (jet lag really is a pain man!).  I will post on the FX crosses a little later once I am fully caught up.

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Yes   The affect of a Brexit on the Euro has not been fully appreciated and only recently commentators has started calculating percentage risk and degree of depreciation of euro against dollar. Most likely this one would be the safer Brexit bet. See the short IG video posted in the latest brexit/referendum thread from last week.

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FOMC day, waiting for the summary of econ projections from FOMC likely to cause sideways action. No one seems to be betting on a rate rise today but will there still be the possibility of 2 rate hikes this year?

 



 

 

 

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DX has hit the Fib 50% (and decent support levels) and turned back up sharply.  Fed indecision led drop over?  Coinciding with potential bearish turning point on EURUSD too and for what it's worth AUDUSD has turned bearish.

 



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What change for DX post FOMC - not much, the dollar has clawed back the losses from the disastrous NFP over the last week but as for breaking out - it's heart is just not in it. Clearly sulking over Yellen indecision.

 



 

 

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Short term maybe but longer term it is not about interest rates.  The CBs have shown that only a total disaster will pave the way for normality to be reattained and that will require sacking all the Keynesian economist (sooner the better) so anyone betting on rate rises is off with the fairies in my opinion.  It is about safety in times of uncertainty and downright carnage.  In such a scenario where will the money go?  Gold and USD that's where.  It's not like there are better rates out there in any of the "safe" currencies.

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There was a rumour going around twitter a couple of months back that Bernanke was overheard in a private conversation at a private party saying he didn't expect any real rate rises 'in his lifetime'. But it's poor Kuroda I feel sorry for, no matter what he does the yen continues to soar.

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That's the "new normal" argument of the PhDs in economics.  I wonder what the economists of the 1920/30 might say in there were alive today..?  The market will correct things and then we can get back to the actual normal, hopefully clearing out all the PhDs in the process.  Medicine is always painful, what can you do?

 

In fairness I reckon Kuroda will get some relieve soon, the Yen moved back off all time highs a while ago and I think it is just in a natural retrace before a big move down vs the USD.

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Yesterday strong bull push in attempt to break descending channel then reversed giving a long double wicked doji daily bar. Gap down on today's bar already filled. Seems unlikely to make a fresh bid to escape being Friday and not much on the calendar, Draghi speaks 16:00 BST.

 



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Quite apart from a fresh bid the DX has seen a retrace so far but not in Fib62% retrace levels with decent Pos Mom Div.  Could USD catch a bid at these levels?  Would coincide with resistance on EUR and GBP.

 



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DX continues down after rejecting the weekly resistance level on Thursday (9560). Heading for a retest of weekly support 9330.

Main drivers down are Yen, Pound, Euro strength.

 



 

 

 

 

 

 

 

 

 

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Could be but if the bullish move is to return then the DX must turn before the previous low (i.e. about where it currently is).  EURUSD & GBPUSD both turning off Fib 88.6% as I write.  This is a pivotal moment as this is the last turning point after which alternative scenarios have to come into play (i.e. weaker USD).  It also looks like USDJPY is turning back down, a flight to safety play after the strong rallies perhaps?

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Once Brexit is out of the way we may be able to get a better handle on DX.  Assuming a remain result then Fed rate rises come back on the agenda for July possibly driving a rally.  Brexit would drive a rally also one assumes.  Therefore it is reasonable to search for a rally after the Brexit vote is done.  Not sure what would drive a bear market in USD just now?  A leave remain result might spark a short term bear move but this would be an overreaction that would correct in my view as GBP and EUR fundamental economic picture is unchanged in trajectory vs the US over the past few years.  

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Im still looking at this from a wider perspective considering the impact Thursday's vote will have upon the market. Possibly a big double top pattern in play here. Given that the index is comprised of near enough 70% EUR and GBP, a vote to remain (which seems the likeliest) would bring massive upside for GBP and EUR, likely sending this market back to/below support. Of course this is hugely dependent upon the result. However, this topping pattern could yet be completed by Friday.

 



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Hi   Interesting take and I can see where you are coming from with the double top however if you look at the Weekly and Daily there is also a case for a simple wave 3-4 retrace in operation.  The second top was just below the first (still close enough for a double top) and could constitute a Wave B meaning that the market is in the final wave down of a natural retrace.  A remain vote would doubtless trigger a reaction in the short term but after that I'd expect the longer term drives to once again take over this short term political angst and for USD to be the currency of choice in uncertain times.

 

Therefore I agree with you that the market is likely to fall in the near term but disagree on the technicals and see any fall as a prelude to a rally.  Target Wave 4 end is in the indicated support zone, which coincides with 3 Fib levels drawn off different start points, highly significant support therefore.  If we get a clear 1-5 count with positive momentum divergence in this area then a Long is indicated for me and likely the reverse on EURUSD and probably GBPUSD as well.  USDJPY likely to also be a Long, as the current charting is indicating already.

 

Thoughts?

 



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Big bull push in USD yesterday matching the 9th June daily bar off around 9350, not catching follow through so far today.

 



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DX gaps down again, tries again to break the 9330 support level.

4 hour chart.

 



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DX back into long term range (weekly chart)

GBP biggest ***** on 4hr time scale. JPY on the 1 hour time scale.

 



 

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Now that the Brexit vote has come in the reverse of what most people thought and the City lost its Long bets along with the Bookies the negative views on the USD can be put to bed and the long term trend resumes as the main force.  As I have posted before that long term trend is,I believe, up (see large time frame chart below).  So the key task for traders is to find a way in Long.  Right now, consistent with my analysis of the specific FX crosses with the USD, I see a brief period of retrace consolidation as the BoE and ECB try to steady the ship, before a major rally in the USD, consistent with a resumption of the rapid post Brexit drop in GBP and EUR.

 



 

 

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Brown wave 4 (previous charts posted) was already in and now we have a Wave 1 up turning back into a Wave 2 down (green labels).  Looks like a touch back on the Daily tramline at around 9500 is highly likely.  This level is also reasonable support and Fib 50% off the recent rally highs.  If we get a turn here, which coincides with projected wave 2 turn back down on GBPUSD and EURUSD, then a long and strong wave 3 rally on USD is indicated.

 

From a fundamentals POV, you are looking at increased geopolitical uncertainty with the very firm Brexit protest against the current political status quo (cue interesting US presidential elections and impending French and German elections, continued political impasse in Spain, a change brewing in Italy - 5star (sounds like a group from the 80s...) - and who knows about Greece!).  Additionally, and rightly, reality dawning on GBP and EUR trade deficits and in due course an massive asset bubble burst.  Can't imagine a more perfect case for flight to the safety of the USD and Gold...

 

The trade to get in on therefore must be Short GBP and EUR vs USD (and Long DX if you like that vehicle) plus in due course Long Gold but not until there is a decent retrace entry offered.  Gold and Stocks will take a little longer than FX to materialise.

 

After than the Long of a life time on FX may be on the cards but that's a fair way off just yet. 

 

Anyone got an opinion, at all? 

 



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USD on its way to that retrace of the lower tramline?  In line with main FX crosses rallying against the USD just now.  When the retrace is over the USD surge will begin I feel.

 



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Still waiting for the DX retrace to complete back to the tramline and Fib 50%...

 



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