DXY: Still On Track For 99

Last week’s outline remains my current perspective:

For those that listened to my live video yesterday, I noted how the set up could provide us a spike down in the US Dollar Index (DXY) towards the lower end of support in the 95.30 region.  However, even though the market did break below that by a bit, I noted that I was going to allow the market to progress until today to know whether the action would invalidate my count.

As it stands now, I cannot say my expectation to rally to the 99 region has been invalidated by the recent action.

First, I want to take this opportunity to present a learning moment.  For those following this chart, you would know that I was counting this decline as an ending diagonal [c] wave to wave iv.  But, as you can see, the wave 4 rally in the ED provided us with “overthrow,” which usually suggests wave 5 would provide us with an undercut of the trend channel at the bottom.  (And, this applies in the opposite manner in an uptrend).  Moreover, this is a common expectation even when we are not dealing with diagonals.

This is why I still wanted to give the market an opportunity to prove that it could represent a bottom.  Thus far, it has.  I will need to see continued strength in the coming days to take us back to the 97 region to suggest we are in the [a] wave of wave v higher.  Alternatively, should we break below yesterday’s low, I will have to revise my expectations on the DXY.  (But, that would not mean that we still would not head higher towards the 99 region).

So, for now, I am still going to give the DXY the opportunity to provide further evidence that we are heading up to the 99 region in the coming weeks.  But, a break down of the last lows would clearly provide us with a detour, and possibly even a major market top in the DXY.

Thus far, the DXY has retained the potential for the more direct move to the 99 region.  For this reason, I am still going to maintain it as my primary count, despite it taking us to the edge of this potential.  But, should we break below the last lows, then it will clearly place me in the alternative count in yellow, and I will also have to more seriously consider the potential that the DXY may have topped in its [b] wave.  But, for now, I am not seeing that as the higher probability.

Avi Gilburt is founder of ElliottWaveTrader.net.