I'm ready to turn a Dollar bull now. I'm no fundamental expert. But based on what I can read on financial editorials, even though QE2 is about to be done Dollar's continued weakness is based on the expectations of a QE3. Read this post for an in depth treatise on "To QE3 or Not to QE3". I don't know if QE3 would occur or not. The only leading indicator I have to look at is PRICE. Can I look at the price action and determine if there are indications of an emerging bullish trend in the dollar? I believe so. See the chart below.
There is no doubt the long term trend is DOWN. But on a shorter term, there seems to be an emerging upward trend. The Dollar Index posted a Higher High on a weekly scale. In Elliott wave terms I can count that as an 1-2 sequence. It could also be an A-B sequence and at best we may have a rally to C and then the downtrend could continue.
After a 5 wave rally from Mar 2008, the Dollar index has slid in 3 waves W-X-Y to a possible double bottom. Wave |W| = Wave |Y| in price and Wave |Y| has taken twice the time to form compared to Wave |W|. Wave |Y| has three sub waves (a), (b), (c) where wave (c) = 61.8% of wave (a). The whole correction from Mar 2009 high to May 2011 is 88.6% of the rally from Mar 2008 to Mar 2009. Long story short, there is a strong confluence of Fibonacci support around 73 for the Dollar index.
I am a Dollar bull until I see the price action forces a change in my perspective. I will post again if my bias changes and hopefully it's longer than another 6 months and I can follow my advice during that period :)
Few other charts to demonstrate reasons for my Dollar bullishness at least in the short term. Commodities Silver and Oil seem to be in a corrective B wave and are possibly heading lower.
