Monday, October 12, 2009

USD: Ready for Take Off?

I am really not a FX person but in THIS market, we're All FX people.
Sunday my waitress was telling me how the USD was toast, and that I should buy gold, so let's take another look.




The Euro topped out July08 at 1.6038 and moved down in 5 waves to 1.2329 in October of 08 .  That .3709 long term move down , call it A,  has been retraced  .68 at the highs of 1.4840 . Within the abc structure comprisng the B wave correction back up, the c from 1.2457,  is structured in 5 waves , an -a-,-b-, -c-,-d-,-e-, and the last -e- beginning from 1.40 is equal to .61 of -c- at the high of 1.485 . While it is possible for that "e" structure to eke out some minor new high like 14855,  further significant gains above there are very unlikely.
The implication for the Euro is dire, for instance a C=A down from 1.4850 targets 1.11.


The Japanese Yen is also at a significant juncture. After correcting up vs. USD in an ABC structure lasting TEN  years, the Yen topped out Jan09 and came off in a clean 5 waves to April 09. Since then it's gained against the USD in a series of abc's that has taken it nearly back to last Dec.'s highs.  Call that waves 1 down  and 2 back up (or a and b). Last week Crudewire called attention to Yen vulnerability. See  USD EURO YEN ETC  and
Yen Leads the Way Down 





If the Yen is beginning a 3 wave down after finishing a TEN yr. move up , the downside  potential gets really intresting; for instance the move down in the mid 90's was from 125 to 68 , so IF this leg is a 3 or C down AND it equals A you're talking about it losing half it's value vs USD. 

Hard to imagine right now.  But then the unimaginable seems to be happening more frequently.

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