DXY - POSSIBLY AT REVERSAL ZONE by DanV on TradingView.com
29 March 2015
Longer term price projection is dependent on longer term historical price data. On this chart we have history going back to 1968 which is not ideal for what I wish to analyse but adequate to form a view based on a particular theme which I adopted since Sept 2012. Namely that USD has lost over 95% of its value since early 1900 say from 1920.
If correct, then we could assume that such a major extended move must be part of a very long 5 wave decline or significantly a larger ABC zigzag and we could be towards the end stage of that. Based on that assumption I am postulating that we could be in potential ending diagonal (falling wedge) wave C or wave 5. This could have started from 1985 high.
In such a longer term analysis it is impossible, to precisely plot the likelihood of the exact price path, so it should be treated as just an outline with allowance for reasonable flexibility. Recent parabolic move to upside has been very impressive. This has resulted in many forecasting a continued strength of USD for many more years to come. Likewise many analysis or chartist have attempted to project, how long and how far it might rise, based on variety of previous swings and potential geometrical relationships and fractal similarities.
I cannot necessarily say they are wrong and many would suggest that my previous charts of DXY have been way off the mark, which could be justifiable. Under the circumstance often folks have said that even broken clock is right twice a day but then having nothing credible to replace it.
Nevertheless, the DXY index is so important to many assets and trying to get a feel for where it could be headed would prove advantageous from possibly anticipating how this might impact other USD related assets and to know when we might need to either adjust our views or know when we are likely to be wrong in our analyses.
Hence I am sharing my analysis with most of the details on the chart. In particular if the DXY price data has mapped out a triangle of some sort since 2009 high. If this is correct it could provide valuable clues as to its future price direction for following reasons:
1. From Elliottwave perspective price breakout from triangles are terminal moves, which means that upon completion of 5 wave move after the breakout the cycle would end.
2. Therefore they are only found in waves B, X and 4.
3. Further The triangle from 2009 high could be a limiting triangle as explained below.
Limiting Triangle - These are normally called as the potential of price move is limited upon a breakout, often by the height of the triangle. There is very little reference to this form of triangle. But it could be recognised if the price breakout point takes place close to or after 78.6% of width of the triangle then the upside is approx the height of the triangle. Where are breakout prior to this and ideally by 61.8% of the width could have extended move which would be more than 100% of the height of the triangle.
Summary:
1. DXY is in a larger downtrend and possibly forming a larger falling wedge (ending diagonal).
2. Has retraced 61.8% of the move from 2001 high to 2008 low.
3. At the upper end of the minor rising trend channel from 2008 low.
4. In GREEN - Wave A = Wave C measured move.
5. Wave C appear to have completed 5 wave cycle, with the wave 5 being extended and parabolic (please see below weekly and daily charts below for close up view) suggesting only a retest to the recent high would compete the cycle.
6. RSI is very extended and in overbought zone.
7. Stochastic is in potential bearish crossover at overbought zone.
8. There are various interesting potential time symmetries - please see chart for details.
Conclusion: if the above holds then at the very minimum we could expect DXY to retrace back to approx 80 level in a corrective abc zigzag, OR make a full reversal to the downside for several years.
This could impact many USD related currency pairs, Oil, Gold and other USD denominated assets.
Disclaimer: All of my work above could be completely wrong, so please use or disregard at your discretion.
As, always please do your own analysis for your requirement. Select to follow me and the charts for notification of any updates. If you like the analysis show this by thumbs up and constructive comments or alternative ideas for all to learn from.
Thanks for taking the time to view my analysis.
DanV