Wednesday, December 23, 2009

Spheres of Influence

The recent decline in the EUR/USD has 'skidded; down the arc of the recent bullish rally emanating from the initial thrust XY. The highlighted area in Novemeber 08 is coincident with the extreme arc of the circle--although not contained within it--and having been established before impulse XY was a reality...although that can be suggestive of a important cycle approaching ie: the March LOW. (debate could last for hours about that hypothesis)
Point Z has touched the arc and prices immediately declined to the horizontal radius.(the right hand highlight)
It is inevitable that the sphere of influence will be violated--but it remains to be seen if the EUR/USD will find support and rally or will continue to decline at progress towards the larger sphere of influence depicted by the larger purple arc.

Bottom Chart US Dollar Index:
This is basically the mirror image of the upper chart--although slightly different due to the components in the US $ Index.
This chart suggests a continued rally in the US $ albiet for corrections from over-bought situations--like the current market condition.
However time and cycle work suggests that there are price harmonics at 80 and 82 between Mar 03,2010 and Mar 16, 2010. It is quite possible that the US $ Index will find its way to this 'strange attractor' between now and March. This could be a valuable indication for option decay traders.

**click graph to view a larger image**

No comments: