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