Dollar bulls beware

The monthly chart below of USDCHF is ominous. Any dollar bull out there needs to have close look at that chart. In simple technical analysis terms, a long term triangle was broken decisively followed by a retest of the broken triangle and then a continuation. That's text book price action for a triangle break.


In Elliott wave terms the long term triangle seems to be a wave 4 at a larger degree. Wave 5 is under way and seems to have completed wave (1) of 5. The tricky question is whether wave (2) of 5 is complete? The chart below offers hope to the dollar bulls for an extended wave (2) of 5. Price action in the next couple of weeks should clarify whether wave (2) is complete or not.

For now there's no reason to be a dollar bull.

PS: I'm short 2 units of USDCHF from 0.9905.

What's up with EURO?

Here's a look at the EURO Index chart. The index seems to have completed an ABC correction from 123.75 high to 102.13 low with a wave A = wave C extension. From the 102.13 low posted in June this year, the index has moved up in 3 waves which could easily be a 3 wave correction before further down side below the summer low. There's extreme bearish sentiment in EURO right now owing to the problems in Greece and Ireland and potential problems with Belgium and Spain. The market might be blind sided to the bearish view that any positive news coming out of the EURO zone can spark a sharp rally. In the big picture, there's a possibility that the ABC correction that ended this summer might have been a large wave 4 with a potential for a multi-month wave 5 rally.
What possible fundamental factors could drive a wave 5 rally?
1) Market has already factored in majority of the bad news coming out of the EURO zone.
2) The problems with USD (all the QE) might be much larger compared to the woes of EURO
3) Strategic balancing of foreign currency reserves by China by shifting partially from USD to EURO

On the contrary, It's possible EURO can go south badly from here if what we know is just tip of the iceberg and the potential problems with Spain and other constituents of EURO are much larger than initially thought of.

Right now I'm favoring a rally in the EURO. It will change if the 102 level in the index is broken.

EURCAD - Update

I got stopped out of the EURCAD trade last week. And sure as it often happens the pair reversed course and went in the direction that I had in my mind when I initiated the trade. The wave 2 correction was just too deep to my liking. I believe that this is just the start of wave 5 and I will get an opportunity to go short again (hopefully without getting stopped out this time). The daily count seems to indicate that we might have completed a 1-2 sequence and have a started a wave 3. I expect another 1-2 sequence in wave 3. The 4 hour chart seems to indicate that the pair has completed or is close to completing a 5 wave sequence from 1.4330. Any 3 wave rally would be an opportunity to sell. As posted last week I believe that the pair might have completed a wave 4. The back to back bearish candles right at the 50% retracement of wave 3 seems to confirm that opinion.

EURCAD Trade initiated

I went short EURCAD at 1.4150 against a 1.4250 stop.
The pair might have possibly completed a wave 2 of 3 or C in a flat correction.

The longer term chart seems to indicate that the pair might have completed a wave 4 of the downtrend that started last year. Wave 4 seems to be in 3 waves where wave A=C. The bearish engulfing candle right at the 50% retracement of wave 3 seems to indicate that wave 4 might be complete. Given that the wave 2 was shallow (only 38.2% retracement of wave 1) a deeper wave 4 retracement was expected in line with the alternating principle. A follow through this week to the bearish engulfing candle from last week would probably confirm the completion of wave 4.

USD/CHF - Is Wave 4 complete?

USDCHF seems to have completed a 3 wave correction at a minor degree. It's possible that the wave 4 correction of the move down from 1.17 is complete and the price could take out previous swing lows to complete wave 5. However, given that wave 2 was very shallow we might see a much deeper wave 4 correction. The correction that seems to have completed may just be the first wave of a 3 wave correction. It's possible that this could evolve into a triangle wave 4 correction or some other complex form of consolidation before another leg down to complete wave 5.
I was hoping for the current move to go up to 1.0050 to go short as posted last week. I would now look for a pullback to go short.

Gold - A case for both bull and bear

Both bulls and bears can make a case based on recent price action in gold.

Bearish scenario: The previous swing high (around 1390) was a major top (wave 5) and price has just completed a minor degree 1,2 sequence. The other scenario is that the previous swing high was a wave 3 and price has completed a A, B sequence of a zigzag correction of wave 4 and the C leg could take the price to around 1280.

Bullish scenario: The price has just complete a wave 4 flat correction and has completed a 1,2 sequence of wave 5.

There are other possible scenarios like a triangle wave 4. I will stick to these scenarios for now until price action indicates otherwise.

USD/CHF - Possible short opportunity

USDCHF - The pair is possibly in a wave 4 correction indicating another leg down to complete a 5 wave move down that started this summer.

The wave 4 correction seems to be deep and could possibly retrace 50% of wave 3 down to 1.0050. This will fit well with the alternating principle of Elliot wave theory given the very shallow retracement in wave 2.

I will be looking to go short if this current counter trend rally runs to 1.0050.