The long held, longer term bearish bias in the $ index remains in place as trade from the early June low at 78.35 is seen as a correction (wave 4 in the fall from the March 4th high at 89.60), and with eventual new lows after (within wave 5, see “ideal” scenario in red on weekly chart below). Note however that such a break to new lows below 78.35 would be seen as the final downleg in the whole decline from last March. Switched the longer term bias to the bearish side on the early March “false break” above the Nov high at 88.45, but will be looking for signs of a more important bottom on new lows below 78.35 to switch out. Longer term support below there is seen at 75.85/00 (Sept 2008 low) and the base of the bearish channel since March (currently at 75.25/40).
Nearer term, the market remains heavy after last week's break of the bullish trendline since early June, greatly increasing the likelihood that the consolidation since that low is “complete”, and with new lows below 78.35 ahead. Note too that the daily macd is in sell mode (see bottom of daily chart/2nd below), adding weight to the view of further downside ahead. However on a very short term basis, there is scope for a few days of consolidating before resuming the downtrend (also potential for a few days of consolidating in the $ versus a number of currencies, see scrolling commentary at www.fxa.com/solin/comments.htm ). So instead of just hitting bids here, would wait for a near term bounce toward 79.75/85 to short (higher entry, lower risk). Further resistance above there is seen at the broken trendline since Jun low (currently at 80.00), and the bearish trendline from the June 8th high (currently at 80.65/75, with a close above a sign to stop).
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