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FOREX & FUTURES day & swing trader.
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  • USD: Long term BUY signal 0 comments
    May 8, 2011 12:21 PM
    Summary:
    A long term trend on the dollar has started and I am calling for it to top at 107.50 by the end of 1st quarter of 2012

    Details:


    Trading ranges.
    usd trading ranges

    All weekly trading ranges (the places where we are not in a trend) have been highlighted in gray. They present a pattern of 3 regions:

    Region3, the lowest, is where trading range took place extensively.
    Region2, very little trading took place there.
    Region1, only briefly traded, quickly, like if we were in a hurry for something.

    First, take a look why we have confirmed the bottom:
    In 2008 we broke below 74.50 (the support) and did a trading range there for almost 4 months.Last week we tried to repeat this again and failed.
    Why did we fail? I explain it this way: if we traded there already for so long, why to repeat? Either we break through it and put a new low or bounce back.
    Conclusion: "dollar collapse" has been cancelled.
    This is a simple pattern in trading ranges and  it is a very strong signal, of course, confirmation is needed.

    Here goes my,

    Prediction.

    Do you see how much trading range took place in Region3 all along the last 3 years? A lot. We were stopping  every month and traded at each level. This is why I think we aren't going to stop for long (i mean, monthly) trading ranges anymore, instead, we will start a trend, and go through all this extended Region3 into Region2 in a quick move. I estimate for it 2 or 3 months.

    Region2 was traded very little, this is why I think we are going to stop there for more time, maybe a month, or maybe two, and decide, either if we break above it or cancel and do a "dollar collapse" move. If the USD manages it to break into Region1 it is almost certain that it will break above 89 and if so, the top for the dollar will be at least the size of current range, which is 14 (88.50-74.50), to top out at 88.50 + 14 = 102.50. But wait, when did you see the market do a reasonable range, afaik, it always over-do it. My number for the top is 107.50.

    Now, if all happens as I expect above, trading in Region1 will be volatile.
    So, what does it mean for the trading strategy? (or better said, my strategy)
    Well, you buy the dollar next week and keep adding into the uptrend until it reaches 82 or 84 and then you sell. If it goes above 85 you buy once and hold it until it breaks above 90 and then you buy again. You don't stack it between 84 and 89, because you can lose it if we get high volatility.

    This is all regarding trading ranges, now lets see:

    Long term channels.


    Few years back I have made this analysis on the trading patterns I saw in the USD:usd yearly old

    Today, the only thing I am changing is the channel width:usd yearly channels

    Now you can see why I am calling the 107.50 top. Eventually I think it will go to 130, and it even can go to 147 (as the upper line of the channel) on the fifth wave, but right now, if we get 107.50 it will be enough.

    BTW, the Elliot Wave labeling is the classic one.

    The "Backup" plan
    usd backup plan

    If the uptrend as I am calling isn't confirmed, the dollar will continue its downtrend until it hits the next channel line. I estimate the bottom to be around 62-65 , by first months of 2012. But again, even if it drops to those levels, a huge rally will start towards 105-115 area. It is not the question if the dollar will rise, it is the question of when and from which point, because as you have seen in 2008, in deflation, the dollar will always win.

    To confirm the uptrend, I have put the validation lines and it is very easy to do, if we close this month above them , the trend has been set up.

    That's it, and I hope it works out as expected. Good luck to all the dollar bulls, if there are any left.


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