The Branch Continues to Creak for the USD
posted Aug 16, 2006 at 05:06PM
USD Daily Chart
Above is the daily chart of the USD counter-trend rally to date. And there is nothing to suggest that it is anything but that, and that the USD remains within a longer term bear market.
From an EWA perspective the move up from the 2005 low has a clear overlapping and thus corrective look to it. To date it has yet to even threaten the 38% fib retrace level.
There are some people who say that there is a C wave coming which take the USD to new highs, but until it gets above some moving average resistance I will remain on the bearish side.
Regular readers will remember that my own view has been, since the triangle broke down, that the USD would retest the lows before any bounce of significance would take place.
When it was at these levels on its way down during its first leg of the bear there was a tangible panic in the air. I do not get that sense at all. Nobody seems overdisturbed over the weak dollar. So if there is a C wave it will likely come only after this B wave putts in news print lows. I doubt that the bounce that follows will get above 90 but it would coincide with that one more downleg for gold before the fabled wave 3 of 3 gets going.
However if the risk of military action against Iran pricks up, then I suggest that they will skip that part almost entirely.
I would stay long gold until the USD shows some definite reversal action. If the USD test old lows with no real hub-hub from the financial press then it is very much a case of look out below.
The bearish moving average crossover could be a sell signal or an inflection point. Until the USD starts proving itself I remain on the bearish side of things.