Quite a run we had in two days, but I think we're just getting started. I'm looking for breaks or consolidations to add to my position, but so far there are no signs of waning momentum on the hourly chart. We have a textbook five-wave move up, but rather than showing a momentum divergence it looks like the fifth is extending and accelerating the trend in a classic fear-driven move. This is more about the Euro being overpriced than the dollar being a fundamentally strong currency.
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| Dollar Index Hourly chart |
The Euro got killed for nearly 600 pips, and I can't find anything in my historical Euro charts that matches it. This is what happens when you have a trade so massively one-sided. Looking at the Open Interest chart below, it seems the specs enthusiastically jumped on board against the dollar after Bernanke's press conference last week, with net longs going from around 60,000 to 100,000 contracts. When Trichet threw a little cold water on the Euro, they all ran screaming for the exit and found the door wasn't big enough for all of them. Lots of technical damage to the daily chart, and I'm nearly 100% certain that the major trend change I've been looking for has started. The weekly chart shows a fantastic outside reversal, taking out last week's high and closing well underneath its low. I think the Euro is going to take out 1.15, eventually.
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| EUR/USD Daily chart |
