Has The Dollar Index (DXY) Topped Out – Or Merely A Correction?

Dave Floyd Aspen Trading Group

I see some opportunities here in FX land....there are 2 possible trades/scenarios. Let's dig in.

For now, using the wave count and forecast that aligns with the current trend, I see at minimum a pause and modest push lower in the Dollar Index (DXY) towards 96.51-95.99 - typical Fibonacci retracements for Wave iv corrections.

If correct.....

Trade #1 seeks to re-establish/add to EUR/USD and/or AUD/USD shorts or USD/CAD longs

This was the analysis from Tuesday regarding EUR/USD and USD/CAD:

Here is what I can offer:

EUR/USD: a break below 1.1380-1.1365 points towards 1.1272 prices fell 65-80 pips
USD/CAD: you would think this would be an easy one, i.e. stronger dollar = stronger USD/CAD....but sadly that is not the case. prices rallied about 100 pips

However, let me temper this bullish DXY view with this. What if the high set today was the END of the 5-wave sequence off the Feb lows? Don't rule it out. The DSI (Daily Sentiment Index) shows a reading of 96% bulls....not exactly the levels where NEW bull markets emerge from.

It is not possible to 'confirm' that view....yet. However, if prices fall away from the highs in a rather impulsive manner....we may find ourselves with Trade #2...

Trade #2 seeks to go long EUR/USD at these depressed levels....and looks for a robust move higher.

Don't change that channel......it is getting interesting.

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Author

Dave Floyd

Aspen Trading Group

If he lived anywhere but Central Oregon, where the trails of the Cascades mingle with the warm sunshine and fresh air of the high desert, Dave Floyd would probably be one of those guys who lives and breathes trading and analysis 24/7.

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