Wondering where the Dollar is headed next? He're is a hint.

Short

U.S. Dollar Index (TVC:DXY)

Updated

TVC:DXY U.S. Dollar Index

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Analysis
A five wave decline from 107.34, the high on Oct 03, 2023 to 100.62, the low on Dec 28, 2023.
In Elliott terms, this impulse structure tells us that the movement at the next larger degree of trend is also downwards. Within this impulsive structure, wave (i) is a Leading Diagonal, wave (ii) is a Flat which neatly predicts a Zigzag wave (iv) by guideline of Alternation. Both waves (iii) and (v) are extensions. The impulsive decline holds well within the parallel trend channel as is often expected.

A five wave move is always followed by a three wave corrective pullback or variation thereof, irregardless of degree; in this case, a rally wave ((ii)).
To where? The Elliott wave guideline on the depth of corrective waves suggests that price action should ideally end within the span of travel of the previous fourth wave of one lesser degree.
Second, the ensuing correction, wave (ii) is unfolding as a sharp Double Zigzag correction labelled (w)-(x)-(y) with waves (w) and (x) completed, wave (y) in progress.

In ratio relationships, sharp corrections tend more frequently to retrace 61.8% of the previous wave particularly when they occur as wave (ii) of an Impulse or wave (b) in a larger Zigzag.
Also, the actionary waves in a Double Zigzag correction namely waves (w) and (y) are often related by equality or Fibonacci (0.618) in time or amplitude.
wave (y) = 0.618 X (w) at 104.87; this level falls neatly within the previous guidelines.
Thus, the cluster of evidence suggest the rally is nearing its end and a reversal is onset; a third wave.
Trade Plan
1) Conservative Approach
Entry: Short at 104.879; the 0.618 retracement.
Protective Stop: 107.34; in an Impulse wave (ii) CAN NEVER retrace more than 100% of wave (i).
Target: 10.87 decline; in an impulse the third wave commonly travels 1.618 times the loss of
the first, as in:
wave ((i)) = -6.72 (100.62-107.34),
wave ((iii))= 1.618 X (-6.72) equals (-10.87)
Risk-Reward: 1:3

2) Aggressive Approach
Requires price action to break below a recent swing low; wave b of a Zigzag, that will virtually suggest the rally has ended and a reversal was underway.

Entry: Break below 103.89
Protective Stop: Recent swing high
Targets: Below 100.62
Risk-Reward: Greater than 1:3

NOTE:Stay tuned to get follow-up adjustments to stops as we monitor the move through completion.

Comment:

We have what could be start of a powerful wave ((iii)) decline indicated by price action penetrating the lower boundary of the ascending parallel channel.

A break below 102.90 will virtually imply the correction wave ((ii)) ended at 104.98

Follow the link below to see the updated chart.

Comment:

Zigzag rally wave ii underway from 103.43 that finds resistance between 104.38-104.64; the 61.8-78.6% retracement levels of wave i.

Comment:

The rally from 103.43 has the emblem of a corrective pattern; price action that is slow, choppy, sideways and typically contained within parallel lines.

Comment:

Price action broke below the lower boundary of the channel which is a virtual indication the correction, wave ii ended at 104.29 as a Double Zigzag setting the stage for a third wave which is frequently strong and broad, and most often the extended wave in a series.

ALTERNATE COUNT
Wave ii is unfolding as a Flat correction; wave ((A)) ended at 104.29, wave ((B)) in progress.

BOTTOM LINE
Bearish below 104.98

Comment:

Wave iii to the downside underway from 104.29 with target of 101.78; the 161.8% Fib multiple of wave i.
Price ought to breakout of the base channel to confirm the trend.

Comment:

Price broke below 102.90, our key level on Feb 22, 2024 validating wave ((ii)) ended at 104.98
Conservative Approach; Lower protective stop from 104.879 to 104.98

Comment:

Wave ((3)) of iii underway from 103.29

Comment:

Zigzag (Double) wave ((4)) underway from 102.35 alternating with a Flat wave ((2))

Comment:

The count from 104.29 favors a five-wave impulsive decline followed by a three-wave zigzag rally that should find support near 103.55; the 61.8% retracement of the previous decline.

Comment:

The count from 104.29 favors a five-wave impulsive decline followed by a three-wave zigzag rally that should find support near 103.55; the 61.8% retracement of the previous decline.

Comment:

Regularly update the alternate count so that if the market deviates from the anticipated scenario, the alternate count provides a new viewpoint and promptly becomes the preferred count.
The count from 102.35 low favors a double zigzag that should find resistance near 103.99-103.88. Price action must stay below 104.29 for this bearish outlook.

Comment:

The Dollar Index has slid from 104.15 which ideally serves as the wave ((2)) high. Breaking below 102.35 would bolster the idea wave ((3)) is underway.

Comment:

Price broke above our key level,104.29 which invalidates our wave ((ii)) high at 104.98. The alternate count suggests a zigzag wave ((ii)) rally underway from 100.62 low. Within wave ((ii)), wave (a) is a leading diagonal, wave (b) is a zigzag and wave (c) is an impulse.
Price action should find resistance between 105.036-104.789

Stop recommendations: Conservative approach: Raise the protective stop to the initial level on Feb 15 at 107.34
For Aggressive approach, the alternate count suggests wave i of (i) of ((iii)) from 104.98 to 102.35 is a leading expanding diagonal and that wave ii must stay below 104.98

Comment:

The five-wave rally from 102.35 hints at wave (c) ending at 105.10 as an ending diagonal.

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