Dollar ETF coiling for a break higher

Good news for Dollar bulls we have made a small change to our Elliott wave count for the Dollar Index and the associated ETF. The overall pattern is still following the upward plan weoutlined in our late-May post, but it now appears there may be potential for an even stronger rally than we were envisioning at that time.

Readers here know the middle part of an Elliott wave advance is usually the strongest part and is usually labeled as a "third wave". In our May 28 post about the Invesco DB US Dollar Index Bullish Fund (NYSEArca: UUP), we were treating the rally as though upward wave 'iii' of (iii) was already underway. Instead it now appears the middle wave is just now starting from a higher support level.

Last weekend we showed our newsletter recipients how the higher support was working for the Dollar Index. The chart below shows how that translates to UUP.


Basically we're looking for the support where corrective wave (ii) can find support and transition into upward-motive wave (iii). Right now it appears to be trying to bounce from the higher support near 25.90. That's just slightly lower than the support we forecasted in May at 26.00.

It may be possible for the final stage of the corrective wave (ii) to reach a bit lower, so we have marked additional UUP supports at 25.55 and 25.29 based on normal Fibonacci relationships with earlier sub-wave 'a' of (ii).

However a test lower is not required. Note how the Lomb periodogram our tool for getting a fast-response reading of a market's cyclical development is reaching the lower edge of its range.

Similarly the actual Dollar Index has been working well with an 84-week cycle that should try to find a low in mid-to-late summer.

Some approximate upward targets in the medium-term for a wave (iii) rally include 26.83, 27.17 and 27.48 based on a type of Gann measurement. Those represent likely areas of consolidation, although the entirety of upward wave (iii) might reach considerably higher going into 2020 and beyond.

You can keep on top of developments in currencies and many other markets by requesting our free newsletter, which we send by email approximately 2-4 times per month. Our next newsletter will feature an update for the Japanese Yen that's consistent with the developments we outlined here for the Dollar.