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Bullish Elliott Wave Pattern Pulls US Dollar Index to 3 Month High

Bullish Elliott Wave Pattern Pulls US Dollar Index to 3 Month High

Jeremy Wagner, CEWA-M, Head of Education

US Dollar Index advances in a bullish Elliott Wave sequence as large speculators are the most net short in four years.

US Dollar Index Elliott Wave Analysis

DXY has quietly been making gains since early April. Using the Elliott Wave principle, it appears we are now in a third wave impulse higher.

The Elliott Wave count we are following is that DXY is in the beginning stages of an extended third wave. We anticipate that this wave will carry higher up to at least 93 over the next several weeks. This aligns with our previous forecast of the US Dollar staging its largest rally since January 2017. Ultimately, this rally may carry back towards the 95 zone before finding meaningful resistance.

US Dollar Index chart with Elliott Wave labels providing a forecast.

Risk to the near term bullish scenario can be set at 89.23. So long as DXY is above 89.23, we are anticipating prices to carry higher towards 93 and possibly higher.

DXY Elliott Wave forecast on a shorter time framed chart.

In viewing the COT report, large speculators are the most net short of Dollar Index in about 4 years. We look to sentiment as a contrarian signal. Therefore, when traders are the most net short, we look for patterns that are bullish and the Elliott Wave count above aligns with the sentiment reading.

Closing Thoughts

Bottom line, according to Elliott Wave Theory the US Dollar Index is in the beginning stages of what may be its largest rally in over a year. Sentiment as measured through the COT report supports that view. In the near term, continued trade above 89.23 supports the bullish pattern that may press to above 93.

This bullish scenario also aligns with our EURUSD forecast for a strong dollar.

Elliott Wave Theory FAQs

What is Elliott Wave Theory?

Elliott Wave Theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders often analyze the 5-wave impulse sequence and 3-wave corrective sequence to help them trade strategically. We cover these wave sequences in our beginners and advanced Elliott Wave trading guides.

I hear that many traders struggle with profitability, why?

Regardless of the style of analysis, many traders do lose money because they do not take the time to study the market and the effect of leverage. At DailyFX, we have studied millions of live trades and boiled our study down into a Traits of Successful Traders guide. You will find how leverage and human nature affects our trading so you can be better prepared for the next correction.

Elliott Wave Theory can be applied to a variety of highly liquid markets. FX is one of my favorite markets to apply the Elliott Wave principle. Learn more about trading FX with this guide specifically designed for you.

---Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

Communicate with Jeremy and have your shout below by posting your EURUSD chart in the comments area. Feel free to include your Elliott Wave count as well.

Follow on twitter @JWagnerFXTrader .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.