Sunday, November 1, 2009

Euro USD

The USD ...it's all been said, we all know the trade.  From Oct.19  
Banks Doubled Down: Super Long Assets /Short USD    "The USD  may make new lows. Barely, like 75.00 It looks like the final stages of a -5- wave  down from 77.50 to complete a (5) wave wedge of greater degree down from 79.50 to complete a 5  for C. Whew."

Exactly. And the USD has now got a 5 count up, for a 1, and at least the first part of the 2 wave back down out of the way. See  USD Ain't Dead Yet  

click on chart to enlarge
  While there MAY be another day or so of further consolidation for the USD, there is a STRONG probability we are going to see a 3rd wave up . Repeat: STRONG probability we are going to see a 3rd wave up . Given  negative dollar sentiment, last seen at 96% , USD carry trade, and central banks short the USD,  see How The Federal Reserve Bailed Out The World
the next leg up will probably be a multiple of the 1st wave, and consistent with a 3rd wave, a moment of recognition. Under those conditions taking out the 50D MA around 76.75 will be a snap. There is a cluster of resistance at the 77.50 level: previous 4th of a lesser degree, previous low,  a .382 retrace of the last leg down from 81.35, and roughly a 3 =1 up. So 77.50 is big, and no doubt a lot of stops will be found just over  that level. Implications for every other asset out there are HUGE.


The Euro of course is basically in a similar, inverse position. It is verging on taking out a trend line that has been support for the entire rally since Mar. AND the.382 retrace of the last leg up from 1.40.  The 1st leg down is .0381 and if the next leg down exceeds that, it will take out the  previous low, the 4th wave of lesser degree,  at 1.4476. Take a look at how that area was the break out from a 3 month long congestion area. Given the Long Term count,  pls see Euro Hit .76 Retrace  , there is a high risk of an acceleration  in a 3rd wave into a multiple of the 1st wave , even 2.618 is not uncommon.

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