The FX Trader’s view –
An earlier failed attempt to embark on a recovery phase, thwarted by a 23.6% resistance area, has seen the Dollar Index slipping lower. However, it could be that this is a final downleg…

  • MONTHLY CHART: The main sign in 2008 that long term bears were losing momentum was the breach of the bear channel top projection.
    Subsequent resistance was found from the 38.2% recovery level.
    Current weakness has tested/eroded the 61.8% pullback level and Dec-08 low (77.688) – how much lower this can go is unclear.
    See Daily chart
    In the Guide we had been on the alert for further s/term bear pressure, and the recent breaks of the small channel base and 78.334 02-Jun low have confirmed the bears in control for now.
    At this stage we note a Fibo projection at 76.40, ahead of the 75.17 76.4% level on the long term chart.
    Characteristic of some other markets too (e.g. EUR/USD), note that a third and possible final impulsive leg (down in this case) is unfolding. We think it is right to be cautious about how long this trend lasts.

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