The Dollar index fell within our target of 82-81.80 as mentioned in yesterday's post. The downward correction could be over now as prices retraced 50% of the entire rise from 80.76.
The Dollar Index is very possible to have completed 5 waves from the low upwards, although the formation is not perfect. The decline has made a low at the 50% retracement of the entire upward move from 80.76 to 82.67. This is scenario implies that if prices start again to move upwards in an impulsive pattern, then we can see a new high soon as a part of a new wave structure. The decline, however, shows a very interesting pattern. The decline as shown in the 1-hour chart looks like another 5 wave downward move. Therefore, the correction may only have finished wave A downwards and we can see an ascending wave B and a descending wave C to complete the correction from 82.67.
The scenarios are equally possible as the decline is impulsive and this means further downwside pressures are to be expected. We could see an upward bounce towards 82.20-30 as the part of wave B corection and then a new low with wave C towards the 61.8% Fibonacci retracement. However, if prices manage to break above 82.55, this scenario will decrease chances. Because of the wave scenarios are equally possible and the current price action shows possibility of a bounce we are cautiously bullish as long as prices trade above 81.71. Now, at 81,87, we could enter half exposure than normal long and wait for a new high above 82.67 to add to our positions. This way, in case of a correction, it is not over and a new low towards the 61.8% retracement is made, we would risk less than usually.
The material has been provided by InstaForex Company - www.instaforex.com
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