Written by Jim Welsh
Hardly anyone is positive about the dollar after its recent decline and the dovish bias of the Fed. This is in sharp contrast to the overwhelming bullishness about the dollar in March 2015, after it had soared from 79.00 in May 2014 to 100.39 in March 2015. The marked shift in sentiment toward the dollar is one of the reasons why I think the dollar may finish the correction that began in March 2015 in the next 2 weeks, making a trading low between 92.00 and 93.00.
After the huge run up into the high in March 2015, the dollar declined from 100.39 to 92.62 in August 2015, a drop of 7.77. It then topped on December 2 at 100.51. an equal decline of 7.77 targets 92.79, although a drop below 92.62 is possible. Either way it looks like a large ‘a’ down to 92.62, ‘b’ up to 100.51, and ‘c’ down the upcoming low.
If correct, a dollar trading low and subsequent rally would have implications for many markets, ie, stocks, oil, gold, emerging markets, and obviously the euro, Yen, and emerging market currencies. If the March 2015 high was wave 3 as I believe, this low would be wave 4, followed by wave 5, which would carry the dollar comfortably above 100.51.
I will discuss this in Monday’s Weekly Technical Review.
