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Yes I see that but what happens if there is a bond market crash, as many are now predicting?  Only safe havens left are USD and Gold/Silver.  When the panic sets in Gold will be, well golden...

 

My prediction, for what it is worth, is that the Fed never raises USD rates but doesn't drop them either.  Helicopter money is more likely (although it may happen only outside the US).  I think the decision will be taken out of Yellen's hands by the markets as yields rise on government bonds due to a price crash (i.e. effective interest rate rise without a base rate rise) and the asset markets (except for Gold/Silver) crash with or before bonds.

 

So the key question is when will the markets vomit the central banker force feeding back up because at that point no one will be paying any attention to what the central bankers say or do - and that is long, long overdue.

 

As to when, I have a theory.  end of August...

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No posts on DX for a while so I thought I'd update.  Of the 2 possible retrace turning points I had pointed out both were hit and provided support, the former for an A-B move and the latter for what looks like a Wave 2 retrace completion (see 4 Hour chart - Blue 2).  Looking at the Daily chart first though there are several interesting factors to note:

  • The strong tramline pair (red lines) was broken through on 24 June but not yet retested.  That is not a problem but it does mean a retest cannot yet be ruled out.
  • The breakout rally did retrace beyond the breakout point and came to rest on the Fib 62%, a very decent retrace termination point so this is a strong candidate for a Wave 2 (Blue label) completion as noted on the chart.
  • The whole move is encompassed by a Triangle (blue lines) and Wave B resistance is currently being retested.  This could form a smaller EWT 1-2 retrace (green labels on 4 Hourly chart) prior to a strong rally.
  • A breakout above the Triangle and the Resistance area offered by Wave 1 (Blue label) completion would be a good Long trade area during a strong wave 3 up.

Looking at the 4 hourly chart there is a small Triangle (Pink) breakout from the Wave 2 (blue label) completion area and a 1-5 wave up to a possible Wave 1 (green) completion.  At this point we could either get a retrace to Wave 2 Green or a much deeper retrace.  A further move up to the Triangle (blue line) is still possible but given the Negative Momentum Divergence building and the Resistance and the motion of GB and EUR I favour a retrace scenario here.  A retest of the small Triangle breakout level for a wave 2 Green completion is my preferred scenario.  Especially if this coincides with Brexit day gap closure on relevant FX crosses (GBPUSD, GBPAUD, GBPJPY, EURUSD)

 

Any thoughts out there?

 



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Having looked at multiple FX pairs I finish with the Dollar Index to see if it supports or negates my other positions.  I have held a Long term bullish bias on the USD for some time now but unsurprisingly this market has been suffering from the same complex retrace moves as its constituent parts.  Some people I keep an eye on feel this market is in a series of so-called nested EWT1-2s, a very strong set up if right and it probably is but I feel the stronger set up is a so-called contracting or coiling Triangle in A-E form.  Note that both of these can exist simultaneously.

 

There are two scenarios here (I discount a possible breakout to the downside on the basis of long term chart patterns and trends):

  1. A run up to the upper Triangle line and fast breakout with no return if the Fed raises rates on Wednesday
  2. A similar run up to the upper Triangle line but then a rebound back down towards the lower line again before the final turn into the long awaited rally.

I favour scenario 2 but you never know...  Wednesday will be a key day all over the markets no doubt.  It may not be the end of things but it must surely be the beginning of the end.

 

I find that this analysis does indeed support my other views and with pretty much all the pairs in the DX basket falling against the USD I can easily see this rally reaching the top Triangle line even if the other only retrace to a relatively small degree each.

 



 

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Looking at this index, if the fed does not go to move rates, then it would make sense for it to move to W-E before heading higher, this is why we will see a nice move down which would apply to our other pairs we have been watching. This is why it does for now make define good reason that we are at present in a triangle.



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