We are at cross-roads on both pairs. I have believed for weeks now that a new top on the EUR/USD was expected but I am now also seeing the possibility for the GBP/USD.

Here’s a potential Elliott Wave count on both pairs with an alternate on the GBB/USD. I have to say there is a 50/50 chance of either one on the GBP. The defining line therefore becomes 1.6650 on the GBP/USD. A break above opens the door to a new top. however, I expect some retrace on the GBP/USD. Let’s see if the line at 1.6650 holds and becomes the trend defining barrier.

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Retracement is likely from this area, however this breach may be signaling tops are finally forming.

The next key support is 1.60

In what I think would be the perfect world is if the EUR/USD makes a new top and reverses hard while the GBP/USD retraces but fails to make a new top.

This could set up an ending diagonal on the EUR/USD while the GBP/USD leads the Dollar rally on the way down.

It will take a week or two to prove out this theory. I’ll keep track of the hypothosis.

Well, indeed the retracement on the index was hard and sudden. Interestingly the GBP didn’t really partake whereas most other pairs did.

Look at the next post as I will speculate that the GBP/USD top may hold but the EUR/USD top should be breached and then reversed.

As the many USD traded pairs seem out of sink it is best to focus on the Index for possible USD direction.

78.80 is a good pivot for Bulls

78.50 is a good pivot for Bears

Cheers

I would say that the overall trend is likely to remain up for the Dollar (down for the EUR/USD) in the medium term but we are due for some retracement prior to the next leg of USD strength.

This of course should result in GBP/USD and EUR/USD weakness. I would be looking to buy USD strength rather then trying to cath the bounce.

Volatility in a market is a good thing. Without it we wouldn’t have many trade opportunities. Here’s how to measure it.

On any chart set there is an indicator called ATR or Average True Range. This measures the travel of a period (bar or candle). You can set the periods measured to get an average OR set it to 1 to simply get the measurement of each candle.

I set my charts at 1. What this does is shows the total travel of each individual candle from high to low (not open to close). Then I look at the graph to see it Volatility is increasing or decreasing. Trends tend to reverse when volatility changes.

Here’s a weekly chart where I have also added a 52 period to get an average candle size for reference and superimposed it on the 1 period. Looking at this chart one has to question where the volatility went and when is it coming back AND what will happen when it does.

The EUR/USD has not had a weekly move greater than the average since May and has been below average since then. “Some 13 weeks” (Oh how Fibonacci)

Big break-out in the USD. This may not be the place to jump in but pull back may proovide oppertunities.

This pair has triple topped and made a lower low. Hummmm…