The US Dollar up trend is mature and appears to be nearing a large pivot towards weaker pricing. This is helping silver prices in its search for a meaningful bottom.
The video above is a recording of a US Opening Bell webinar from June 3, 2019. We focused on the Elliott wave patterns for key markets such as DXY, silver, gold, EURUSD, GBPUSD, NZDUSD, USDJPY and S&P 500.
US Dollar Index May Have Turned to a Large Trend of weakness
The US Dollar Index is showing more symptoms of a longer lasting turn towards weakness. As we write, there are several options we are following that are higher probability but they all have one thing in common. Any strength is likely to be followed with a deep cut of weakness. If any strength emerges, we are anticipating DXY to hold below 104 and possibly below 100.
A key level we are watching right now is 96.48. If 96.48 breaks, then the probabilities shift towards a heavier drop and DXY may continue down towards 92 – 94. From there, various wave patterns begin to diverge.
On the one hand, we can count a completed Elliott wave ending diagonal pattern at the May 23 high (noted in grey on the daily price chart). The ending diagonal would count as the (C) wave and final wave of the larger rebound that began February 2018. That would imply the large turn towards US Dollar weakness is already underway and likely to last several months and possibly more than one year and drive DXY down below the mid-80’s.
A less bearish scenario suggests the (B) wave that began August 2018 is still in progress and is dipping in its final waves. The (B) wave scenario may only dip to 92-94, find support, then rally to its terminus near 100.
Bottom line, a strong trend towards US Dollar weakness may imply strong trends in several markets priced in dollars like silver or gold.
Silver prices pop above price channel
Our last silver price update was April 29, when we stated “little progress has been made since April 15 and the waves do not appear motive. Therefore, we will not be surprised if silver makes a deeper cut and one more jab towards lower prices.”
Lower prices were cut indeed. Remember, back on March 25, silver prices were trading near 15.53 and we discussed the potential for another wave lower into the 14.40-14.80 price zone which may lead to a strong bullish reversal. Now that silver prices have arrived, we have the minimum waves in place to count the three-month long correction as over.
Our last silver price update from May 20 discussed several wave relationships appearing near 14.40. The larger corrective pattern is a bearish Elliott wave zigzag that began from February 20 (left side of chart).
- 78.6% retracement of the November 2018 to February 2019 uptrend is at 14.39
- In the zigzag, wave ‘c’ is equal to the length of wave ‘a’ at 14.40
As a result, there is a lot of evidence in a relatively small zone suggesting a bullish reversal and pivot.
Earlier today, silver prices popped up outside of the green channel signaling a temporary and possibly medium-term low is in place. If the ending diagonal is finished, then a swift rally to 15.64 is a primary target. From there, additional rallies may reach 16.60 and 18.00. The November 2018 low of 13.89 should contain any further drops under this Elliott wave analysis. If 13.89 is broken, then some other wave pattern is at play.
Therefore, the current Elliott wave for silver prices is that wave 2 or (B) has ended and is rallying in wave 3 or (C) towards 16.60 and possibly 18.00.
Elliott Wave Theory FAQ
How does Elliott Wave theory work?
Elliott Wave theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders analyze the waves for 5-wave moves and 3-wave corrections to determine where the market is at within the larger pattern. Additionally, the theory maintains three rules and several guidelines on the depth of the waves related to one another. Therefore, it is common to use Fibonacci with Elliott Wave analysis. We cover these topics in our beginners and advanced Elliott Wave trading guides.
After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.
---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.
Join Jeremy in his live US Opening Bell webinar where these markets and more are discussed through Elliott wave theory.
Follow Jeremy on Twitter at @JWagnerFXTrader .