Saturday, September 18, 2010

U.S. Dollar Update

Is the US $ falling into place to complement the projections for the Gold and Stock markets?

The recent decline certainly took the wind out of the sails of the nascent bulls over the last three weeks. However, it does appear that a secondary low could be in place. This fits in well with the projections for gold and the S&P 500--i.e. potential high pivots in both markets between September 20-25th.
An A-B-C style decline may have ended on Friday with a bullish hammer candlestick being formed off the 80.86 low which was a .776 retracement level of the August advance.(near 78.6% (sqrt of .618) and .236 of the rally amplitude--(.382*.618))

The "C" component of the 'A-B-C' was 1.272 times the amplitude of the "A" wave. There are several geometric cycles clustered around the current time frame that give credence to the possibility of a corrective low being formed.
  • 210 days from the Feb 19th high: September 17
  • 180 days from the March 25th high: September 21
  • 120 days from the May 19th high: September 16
  • 90 days from the June 21st minor low: September 19
Clusters like this can be quite powerful. Note how the June 21st (Summer Solstice) plays a role in the USDX, Gold and S&P markets. This is significant since we are approaching the Autumnal Equinox.

Although it is premature to state that the decline was corrective in nature--and not the start of a new impulse wave down, further upside action would begin to paint a more bullish picture for the USDX. A close on the USDX above 83.00 would be a significant bullish development.

Risk-Reward at this juncture appears to be well defined for aggressive traders.

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