The U.S. Dollar Still Not Breaking Down

This week the DXY moved lower but quickly retraced those losses and moved higher into the end of the week. This move down and then move back up has given us what counts best as three waves thus making it more likey that we may still need yet another higher high to finish off the wave (b) to the upside. So as I have been noting while the pattern is getting quite full until we actually break under support we still do not have confirmation that we have indeed struck a top in the DXY just yet.

Shorter Timeframes
Under the expanded (b) wave count we technically have a full pattern into current levels and have the potential to see a top at any point in time. With that said we still need to see this break back under the 104.77-103.95 zone and then the 102.64 level to give us a signal that we have indeed topped and unless and until that occurs we still can continue to grind higher. 

Furthermore, if we are topping in a wave (b) then the next leg down should come in five waves. So we should see a both a break of support from a price perspective and a five wave move down from structural perspective to confirm a top. With what counts best as three waves down this past week it does make it more likely that we may still see another higher high before an ultimate top is seen. From a purely price perspective a break under the 102.64 level will give us initial confirmation of a top will come with a break under the 100.55 level and final confirmation with a break back under the 99.23 level. This will then lead us into the larger degree count as discussed below.

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 in 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 counts 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 (6 hour)
$DXY (6 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.