As we begin a new week of trading in Forex I'll take my usual look at the US Dollar Index before looking at individual trades. As I've mentioned before I like to get a general idea of what direction the US Dollar is moving before I start looking to trade on currencies such as the Euro or Pound.
As I look at the current chart of the US Dollar Index I see that we may be at the bottom of a Wave 3 decline and the Wave 4 retracement may be starting. The normal retracement range of a Wave 4 is between 38.2% and 61.8% which gives us a range from .8250 to .8516. While the US Dollar is in this retracement we should see some short term declines on the Euro and Pound and therefore my bias will be to look for shorts on these markets. If the US Dollar does get to these levels I will begin to look for Wave 5 lows on the shorter time frame charts (60,180, and 240 minute) of the Euro and Pound which could indicate the end of the profit taking rally on the dollar.
Ron Wheeler
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