The U.S. Dollar Continues To Grind Higher But No Significant Change To The Pattern

This week the DXY continued to grind a bit higher now hitting the 50% retrace level from the move down off of the 105.82 high. Overall, however, there is really not much change to the counts that I am watching and while not the cleanest pattern at the moment, I am still leaning towards the ending diagonal count. This path should still see this move lower over the coming months. That path is not without it’s issues however and if we do move higher I have laid out a viable alternative path in the shorter timeframe section just below. 

Shorter Timeframes
 As I noted last week with the break back up over that 101.56 level the door is now open for the wave (c) to be taking a more complex path lower to complete the move down into the 93.11-90.20 region. My base case remains that we are tracing out an ending diagonal pattern for the wave (c) with this current push up this week as part of a wave ii of that ED. We are still very early within this structure so it’s difficult to rely on this pattern but at the moment this is my base case. I am showing this path in white on the 8 hour chart. As long as we hold under the 104.36 level this will remain my base case. Should however we see a break back over this level then it would open the door for this to be following a more complex expanded b wave.

Under that case which is shown in yellow on the chart we would be looking for a wave c of larger wave (b) up over the 105.82 level. While this path is certainly a distinct possibility I am slightly leaning towards the ED count at the moment but should we see a break over that 104.36 level then I will likely move towards the yellow count as the primary path forward.  

Bigger Picture

There is still no significant change in the bigger picture count, and as I have noted previously, I am counting the top in October as either the white wave (3) or the green wave (5) of ((A)).

The white count should head down towards the lower trend line to fill out that wave (4) before pushing higher once again to finish off the larger degree wave (5) of ((A)). The exact bottoming level for this potential wave (4) has become a bit more clear as noted above as we have likely topped I the wave (b) of that (4). Ideally, I would be looking for that to come in at the 93.11-90.20 region as this is the target zone for the wave (c). 

The green count is suggestive that we have topped in all of the larger degree wave ((A)) and we are already in the wave ((B)) down. Both the white and the green count are going to look very similar in the early stages of this move as they both are corrective in nature. The green count of course would give us a much deeper retrace for that larger wave ((B)) before turning higher, whereas the white count should find support much higher before getting that higher high.

$DXY  (1 week)
$DXY (1 week)
$DXY (8 hour)
$DXY (8 hour)
Michael Golembesky is a senior analyst at ElliottWaveTrader covering US Indices, the US Dollar, and the VIX. He contributes frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trading service.