The last few weeks I speculated the that the Dollar Index was in an ending diagonal which would signal a turn. Indeed we saw this turn and we are now in a re-tracement of the counter-move.

The question this week is are we going to see further counter trend? I would think we need a little more counter-trend prior to another positive Dollar move.

Cheers and good trading!

USD/IDNX
I’m still watching the USD Index very closely. What is of particular interest is the closing price on Friday was a perfect match for the previous swing high. It has managed to make new highs during the week but the struggle to stay above is great. The shape of the diagonal has changed some but it is still intact as an important pattern. What happens at the top of the range is going to tell the story for the next move.

EUR/USD
Here too the pattern is intact and I am waiting for strong sign for direction. Anything is possible right now. I am trying to keep my bias neutral until better evidence is provided by a break of upper or lower trend lines.

GBP/USD
As with the Euro, a range has developed that could send the price either way. The bottom is a strong pattern but we have seen many apparent bottoms form that should have resulted in a turn before. Again I am trying to keep my bias neutral awaiting further evidence.

USD/CAD
Well, I said several weeks ago that a double-top around 1.30 was quite possible. I must admit, even I’m surprised that we got all the way there. It the action from the current range that should now determine the next trend.

EUR/JPY
This pair is closely mirroring the EUR/USD. The lower ascending trend-line was broken but price action quickly reversed, so a direction here is not clear either. Be patient and wait for the next break.

My focus this week is on the USD/index. It has some very defined trend lines that create the correct look of an ending diagonal. I would express that extreme caution and vigilance is required around the current trend-line as this pattern can also be viewed as a leading diagonal or in other terms; basing to go higher.

The key is to wait for good signals at the defined levels for break-throughs or break-downs. Considering all the attention being given the markets this weekend by the G20 summit we could/should be in for another volatile week.

The USD is still being favoured as the safe haven currency in this mess. The thing is though, just a few short weeks ago some annalists and news media where reading the USD its last rights. Expecting further demise.

Overall sentiment (Fear) is what moves the market and sooner or latter this fear based thinking will flip back against the Dollar. At least for a short time.

So keep an eye and ear to the Media. When they start saying the Euro and the GBP are doomed, then I would start expecting a reversal.

EUR/USD - Could go either way - I'm expecting a thrust downward and then a reversal. BUT - A break above the range would result in a strong climb.

GBP/USD - Same as for EUR/USD. Play the break of the range when it breaks out.

EUR/JPY - Again here's a pair that offers a nice range and should a thrust downward take place I expect it will be limited as a correction should go a little higher.

USD/CAD - Everything here points to a double top. However this pair has a mind of its own and is very volatile and needs to be traded with extreme caution.

Cheers and good trading