Dollar.....Whats Next??

Every one has a theory as to what happened last night, early this morning.

Heres mine...

As we know every one was very short the USD and very long most other currency.

The market gapped upon opening on Sunday. We all know the gap usually gets filled, so the world started trading the gap. There were so many people/banks ect... taking advantage of the gap, momentum built up and the gap was overshot. Taking out S/L's as it dropped. The S/L's getting hit compounded the momentum created by the gap trading, big banks decided to launch an attack on S/L's, and now the price has cleared the board of all those longs that were in place, and gave way for all new long entry points.
Also....the price was too high for big buyers to jump in and push euro$ to 1.4500. Now the price has fallen 200-300 pips, there is a good point to place longs and get a running start at resistance levels.

The 95% will be sitting around scratching there heads, and some will be taking shorts because I heard so many say as long as price remains above 1.4200 there bullish. So the drop below 1.4200 will turn a lot of peoples view the wrong way.

Both euro$ and gbp$ hit major trend lines for support. Only a break below these trend lines will change my $ view to bullish or neutral.

I have been using pitch forks alot lately and they've become a regular part of my trend lines. They'll explain why a price suddely stops and bounces for seemingly no reason. Today a median line from a mid term scale got in the way. The price looks to be forming either a bullish sideways zig-zag correction, or a truncated triangle as a 5th wave. But it will form a wave structure that will make this move disappear into the sticks. It took the same wave down as it did 2 waves ago, but only did it in a few hours not days. There is another chart I posted in here or another forum(i forget where) that tells of this possible wedge for a 5th wave. And the wedge outlined in red. But I got caught very short in the $ and kept expecting a bounce. Got out with minimal loss as far as pips go.

I believe this thing will push its way up in this triangle, wedge, truncation or what ever you want to call it there all 3 the same thing. Basically what it is ...the markets unwinding and going to top out and make way for a greater correction. A tug-of-war bears and bulls. It will probly confuse most and form in a weired way thats hard to predict.
Since this move has left most wondering whats going on I figured I'd give you some real solid technical views. Unfortunately my analysis is on euro$ and not good with any others. But the $ pairs should correlate because its the $ thats moving the price. Some will just be larger scale.

Dave

That is the most reasonable theory I've seen today. Now price will need to trade in 'honest' (slow compared to last night) fashion to where ever the market really wants to go. Not so crazy after all.

I am not a forex trader yet I do follow currencies on an hourly basis.

I believe the upgap was due to the G7 meeting we had over the weekend and on speculations the ECB may need to raise interest rates in december due to rising inflation.

However, the new highs didn't last long because of major concerns of a slowdown in global growth.

In fact, gold and oil lost over 2% today and the US eminis were hammered for most of the day before rallying the last 30mins due to positive earnings reports.

If you take a look at the yen getting stronger against all majors, that's the unwind of the carry trade. Yen goes up, aud, nzd go down and euro should lose against the dollar.

That's what we had seen last summer.

Keep a close look on oil and gold. The dollar will reverse as soon as oil and gold start dropping.

My honest answer to this question is. I don't have a clue

thanks for your post

As I was watching CNBC and reading the G7 statement on Friday, I couldn't help but think - you guys keep talking about strengthening the $, but let's see what happens when the interest rate drops again this month (or next, but there will definitely be another one). A truly classic case of policymakers saying one thing and doing a totally different one, and all the pundits following suit. Sure, the market reacted first thing in its usual psychotic fashion on Sunday, but give it a few more days and it'll all be back to the same old story - the dollar will once again be a good short.

I just don't see any fundamental basis for any strength in USD in near future.

You are spot on. There is NO way the usd can strengthen so soon. There are no fundamentals supporting it currently. Only Bloomberg and CNBC will tell you the US economy is healthy. The rest of the world knows it is not

Dont mistake profit taking for a change in trend. What happened yesterday was mere risk aversion.