Fibonacci Confluence Support Zones for the US Dollar Index

Dec 14, 2008: 12:26 PM CST

In a previous post, I highlighted the Fibonacci retracement confluence clusters for the S&P 500 Index and now I wanted to show the same methodology of possible confluence support on the recent downswing in the US Dollar Index.

US Dollar Index with Fibonacci Clusters:

Using Constance Brown’s method of drawing Fibonacci grids off significant points (of support, not necessarily spike highs or lows), we have the following Fibonacci grid.

I was only able to draw two major Fib grids, as price really has made a steady upwards advance with nary a pullback.  As such, I took the grid off the April-July price lows (from price consolidation) and off the September lows, taken to the resistance price just above $88.00.

We see only one zone of Fibonacci confluence, which picks up about the $82.00 index level ($82.17 and $81.80 to be exact).  It is likely that price will find at least temporary if not major support at that level, but should it fail there, we would have major support coming in at the $80.00 Index leel, which would represent three support confluences:

The 50% large scale retracement at $79.80
The 61.8% minor retracement at $80.73
The prior swing high in September at $80.38

Although I haven’t labeled it as such, the possible Elliott Wave count has us carving out a Wave 4 retracement, with the March to July area being a complex correction; the July lows to September highs being Wave 1; the September price correction being Wave 2; while the large momentum rise from $76.00 to $88.00 being the impressive 3rd Wave.

This count will be confirmed if price remains above the $80.00 swing high from Wave 1… and will be invalidated should price cleanly break that level.

For now, continue to watch the $82.00 price level in the US Dollar Index very closely.

Corey Rosenbloom
Afraid to Trade.com

4 Comments

4 Responses to “Fibonacci Confluence Support Zones for the US Dollar Index”

  1. mmrza Says:

    Hi,I see it like this,I think we completed 5 waves up,with the 5th wave truncating the fourth,and ended in early Dec.We are now in the first wave down,what do you think.

  2. Corey Rosenbloom Says:

    M,

    That could be an alternate wave count indeed. We may be seeing the ABC corrective phase of Wave 4 taking place, but I’m not sure I’m ready to call the swing from $83 to $88 as a short Wave 5 of sorts.

    That is a possible interpretation though.

    Also, one might also interpret the choppy action from March to June as Wave 1, a quick pullback in July as Wave 2, then the 3rd Wave up into September with the 4th wave also terminating in September to have the recent move be a Wave 5 with the current conditions an ABC correction of this.

    I do think it’s vitally important to have alternate counts to your Elliott Wave analysis and be able to account for other possibilities if the basic rules get violated or new price information sheds additional light.

  3. Aly Says:

    Hello Corey,

    Great work on the blog. Really enjoy seeing your analyses.

    Just curious how breaking the $80 level would impact the count? What would be the count in this case?

    Thanks

  4. Corey Rosenbloom Says:

    Aly,

    Thank you for reading.

    Breaking below $80 would have supposed Wave 4 breaking into the price territory of Wave 1, which is one of the three Basic Elliott Principles (that wave 4 can’t enter the price territory of wave 1) so we’d all need to readjust – confusingly I must admit – were that to happen.

    We would adjust to go more in-line with what Mmrza said, that Wave 5 has already completed and that we would be in an ABC corrective phase, rather than in Wave 4 like I think we might be now.