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US Dollar index - Fed rate decision

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Are we about to get a confirmed breakout of the 1 hour chart channel?  I have a turn just inside my Daily chart resistance zone for a wave 1 termination (see previous post above).  I have NMD and a strong EWT wave count set up and now the beginnings of a channel breakout downward.  Coincides with reverse set up on GBP and EUR (naturally) but also AUD, which is not part of the basket.  Gold/Silver are at potential turning point as well, providing correlations.

Trading strategy (on EURUSD and GBPUD and SIlver):

  1. Trade Long on breakout of the respective channels/triangles with stops below recent lows and/or key support turning zones, whichever is lower).
  2. Move stops to next low (but remaining below the channel breakout zones (and lines) until the rally is away (i.e. after a suitable 1-2 retrace and rally) then move stops to break even.
  3. Consider adding Longs on the 1-2 retrace and rally to pyramid the move but not too much as it is counter trend
  4. Warning: this is a counter trend rally (except for Silver!) so caution is advised as fast reversal is a risk (hence the focus on stop approach)

One to watch.

DX-1-hour_131118.thumb.png.c8b949fce6d62dda9b4d1836bc4a0e06.png

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I'm seeing USD range bound ST and expecting a short term rally before a medium term bearish move, with a break through support.  I see similar on EURUSD and Silver/Gold.  Stocks have been a bit depressed this morning, ironic really that the Europeans were so bullish the past few days and just when the US large caps join they do an about turn...  Could we get stocks weakness and corresponding USD strength and then an opposite turn on both?  Not this could also happen with USD just breaking through support, doesn't have to do another run up... 

DX-1-hour_161118.thumb.png.3ec2f5941cb3d9daf727a8e67c1e1dc2.png

 

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DX has arrived at a key moment having moved all the way to the Fib 88%.  I have noticed of late that retrace moves are hitting this level and even double bottoms/tops more frequently these days.  Such volatility is indicative of major trend changes to me as Bulls and Bears slug it out but which group will be dominant this time..?

For USD pairs a turn here is highly indicative of a significant retrace to come prior to USD resuming its major trend rally.  All markets go in waves, whether or not you subscribe to Elliot Wave Theory this up/down motion is easy to prove, just look at a price chart.  So I am expecting USD to retrace prior to a major rally phase.  Could be now, could be it needs another leg up before this happens.  Could align to a Santa Claus rally on stocks.  Could align to dovish showing from the Fed on interest rates, could align to US NFP expectations or actual data that would suggest the Fed needs to go dovish.  Who knows.  I don't really care at this point, I just look at the price action and if I see it turning at an important support/resistance zone I go with that.  Let's see what happens next...

From a technical perspective on the chart below:

  • Big picture charts (previously posted on this thread) support a long term rally but we need a Wave 1-2 retrace first
  • Turning at the Fib 88% as per assessment above
  • NMD plus same on RSI and Stochastic
  • EWT A-B-C form with 1-5 completing on the Wave C

Trading strategy:

  1. Look for ending channel breakouts on key USD pairs to get long/short (opposite USD)
  2. Look for supporting support/resistance zone turns and supporting momentum divergence
  3. EURUSD and GBPUSD are showing a couple of good set ups.

DX-1-hour_281118.thumb.png.161466ab110fa50b1c5d421dcb461105.png

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After a little retrace action USD bearish phase has finally go going, and all related pairs accordingly.  I am expecting this to last for a while but it is (in my view) a counter trend rally so I expect the USD Bull to kick in when the markets realise that the game is up for stocks.  Figure we have while yet before that happens though...

DX-Daily_041218.thumb.png.70bc4baaf0ed4c46a9822070f414ba0e.pngDX-1-hour_041218.thumb.png.4236228d3c74acc7d3c25cd54d9109da.png

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USD rallied hard, I guess off the back of stocks weakness but now turning back down, which could be a reassertion of declining T-bond yields drag (down to 2.91 from 3.24 high at the beginning of November (10 year bond yield = real interest rates, like mortgage rates etc).  Whatever the reasons DX and associated pairs have all closed recent gaps and look to be turning again into a period of USD bearishness.  This could be a catalyst for Gold/Silver also.

DX-1-hour_051218.thumb.png.035d299d858fc4fd9af3158ca4103597.png

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Having spend the past few months waiting for a USD Bearish retrace it looks like we may be near significant overhead resistance on DX.  There is still a bit to go, which looks to EUR and Yen as key drivers with some support from CAD and recently CHF (as Gold goes into a Bearish move perhaps...).  I see further advances for USDJPY and EURUSD should retest the Fib 76/78% area of its 1hour chart (the breakout of the Daily chart Triangle zone.  GBPUSD however could easily rally from here as an outlier.

Regardless of the whys and wherefores DX seems to have another leg up in it before any significant bearish retrace.  If Treasury Yields continue to fall off and if the Fed gets dovish again in the face of stalling economic data and struggling stocks then USD could easily reverse, at least until the market realises the game is up for the global economy and USD becomes a safe haven.

DX-Daily_121218.thumb.png.b75a73575c132fba1228039f7da415d6.png

 

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