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Originally Posted by 20pipsaday
seems like we may test the bottom here (although who knows, we are coming close, but I guess no guarantee we retest 80 anyways)
I just get the feeling the powers that be are not going to let the USD index collapse through 80 (if it does, it kinda means a freefall of sorts, at least another 10% down this year)
Maybe eventually the index at 80 will fail, but cutting right through it seems not likely to me at least.....
maybe a double bottom at 80, a rally back to 95, then back down to 80 (over say the next 2 years)..... that would make a massive head and shoulders on the weekly, maybe then 80 will be ready to be broken?
any thoughts?
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Hi 20pipsaday. I like your thinking.
People's mindsets have for too long believed that the USD downtrend will continue without another major retracement.
If you look at the daily or weekly charts for 2004, the USD spent from February until October stronger then its February lows, and only re-commenced making lower lows from October to December.
Again with last week's rumoured move by the Bank of Korea to be switching their reserves from USD to EUR, we had a wild reaction in the Asian timezone that has led to the current high prices.
But, I agree with your sentiment...there are powerful forces at work that do not want to see the USD much lower, and the charts for me are saying caution at best with regard to a blind, USD-bearish stance.
I have been told by one trader with his own proprietary analysis with 40+ years experience in the markets that in his view, double bottoms rarely end trends. Instead, false breaks tend to end trends. In terms of the double-bottom pattern (which does of course occur), a stronger signal is a double-bottom ABOVE a previously established low - ie a 'W' pattern above the low that was created immediately before the W. Guess where this pattern is evident now? In the currency pair that to my mind portends the direction of the USD more than any other (ie it moves first before all others)? The USDCAD. Take a look at the daily chart....
Specman