This time last year was a totally different world. The presidential election was still 5 months off. There was no way the UK would vote to leave the EU. Equity markets were moving sideways and the US Dollar was just starting a 10% move higher. Fast forward to today and everything has changed. Brexit is under way, Trump is running the country and the Dollar is sliding as world equity markets continue to make new all-time highs.
Strong equity markets are a good thing but what about the Dollar? How far will it go? The chart below gives one view. It shows that run higher to the top of the long channel it had traded in for 2 years and the subsequent break to the upside. The pullback from the top saw a bounce in February but then another push lower that continues today. This week it has passed through the 61.8% retracement of the leg higher. How far will it go?
This price action is tracing out a bullish Bat harmonic pattern. Bullish sounds good, right? And it is, but the pattern still has more downside to play out before reaching its Potential Reversal Zone (PRZ) at an 88.6% retracement. That would put it at 94.25. Add this to the last review of the US Dollar from May 17 where I discussed a target from a falling wedge to 93.80 and a price objective from a Head and Shoulders Top to 94.80 and the story is getting quite powerful for the downside to continue.
But it is also lining up several tight targets as to where the US Dollar may eventually bounce. Three targets within the range from 93.80 to 94.80 from three different types of analysis. You had better keep both eyes on this price zone for the US Dollar.
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