Elliott Wave: EUR/USD, $ Index

The euro achieved the targets set yesterday between 1.4450-1.4500 zone and then strongly bounced lower as Oil hit and bounced from $100 per barrel (psychological point). Gold also went higher and then traded lower with the three wave moves into the correction. Higher prices may be the case today. Below you will find the Eur/Usd and U.S. dollar index charts, which highlight why traders may find dollar weakness in the next few weeks.

Eur/Usd

Euro is currently trading in a very critical area with prices around the 1.4200 level. The temporary trend line support has been noted below. Two possible wave counts are valid as long as the prices trade in the range between 1.3900 and 1.4500. On the left side of the picture, the first wave count is signaling for higher prices in the next few weeks if the bounce from the bull trend line happens. The right side of the picture is showing the second possible wave count, which is labeled as a three wave move correction with the blue A-B-C waves. In this case, we can expect a move lower if the market breaks the trend line. This may form a resistance to new lows. In this scenario, it may be good to review other pairs, commodities, equities to confirm findings.& The market is signaling for a weak dollar in the next few weeks (left count) especially after reviewing the daily U.S. dollar index chart.

U.S. Dollar Index

We posted a similar chart with the same wave counts as below a few times already. We are looking at the daily chart with the completed five wave move in blue C) of 4 with the prices in 80 area. After that the market made a move down to around the 77.00 level and broke the daily trend line support which held prices above from the middle of July 08. Now the market is testing this trend line again around 79.40 but in the opposite direction. As we know the basic rule from trading; every resistance becomes support after the breakthrough and every support becomes resistance. The most important question to ask is: Will it hold? If we look at the price reaction on the chart below, we can easily say that prices bounced from the trend line, at least for now. This could be a signal for long positions on the euro. It’s important to wait for the daily and weekly candles today to close below the resistance 79.40. This may signal short dollars in the next few weeks.

Traders, it may be advised to wait until next week.& Have a nice weekend, Grega.

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