US Dollar Update

DX is at the VWAP of its Long-Term Megaphone (Red)

DX is at the VWAP of its Long-Term Megaphone (Red)

The dollar is hung up at the VWAP (volume-weighted average price) of a very long-term megaphone that began forming in the late 1980s (red on chart).  It’s also paused just above the breakout point from a falling wedge top connecting the 1985 and 2002 dollar highs.

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX got to its recent high within the red rising megaphone on the second chart.  That high pierced the formation top before reentering and would usually make a new high within the formation before breaking out of it.

Then DX must return to at least the base of the rising megaphone at roughly 93.

It could get there by returning to the blue megaphone VWAP at roughly 95 and starting a new megaphone there (green scenario).  The green scenario could produce a series of new megaphones inside megaphones across 95 to form a big continuation triangle before the dollar continues up to the top of its long-term red megaphone.

But it’s more likely that the dollar will continue through 95 to the bottom of its blue megaphone to form the larger orange megaphone.

Euro Price Channel in Critical Decision Wave

Euro Futures have Just Confirmed the Red Price Channel & are in the Channel's Critical Decision Wave for Starting a Top vs Starting a Melt-Up

Euro Futures have Just Confirmed the Red Price Channel & are in the Channel’s Critical Decision Wave for Starting a Top vs Starting a Melt-Up

Euro futures have just confirmed the red price channel and are in the critical decision wave for breaking out the channel into a melt-up vs. starting a top.

Minimum Melt-Up Target would be the Top of the Navy Blue Falling Wedge

Minimum Melt-Up Target would be the Top of the Navy Blue Falling Wedge

The minimum target for the green melt-up scenario would be the level of the top touch on the top of the euro’s falling wedge on the daily. The euro could go as far as the potential neckline of the big inverse head and shoulders (H&S) on the chart at roughly the May 2, 2016 high.

A top here would mean at least a right shoulder pullback for the potential smaller inverse H&S on the chart and could mean a double bottom or new low.

The euro has a long-term target of its September 2000 low.

DX Update

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX broke through the top of a flat-topped megaphone back in mid-November, and then hung around without really taking off.  That usually means it’s turning the flat-topped megaphone into a conventional megaphone (orange on chart).

DX also needs to retrace to the bottom of its blue rising megaphone.

DX could be completing the top before the dip right now, or it could work its way higher in another leg up for a taller head on a H&S top for the head of a larger H&S for the blue rising megaphone.

Euro futures have confirmed a falling wedge bottom.

Euro Futures Falling Wedge Bottom

Euro Futures Falling Wedge Bottom

US Dollar (DX) Back at Top of Flat-Topped Megaphone

DX is Back at the Top of its Red Flat-Topped Megaphone and is a Favorite to Make Another Trip to its Bottom

DX is Back at the Top of its Red Flat-Topped Megaphone and is a Favorite to Make Another Trip to its Bottom

The DX has returned to the top of its flat-topped megaphone (red).

It has formed a rising megaphone (blue) to get up here.

That means it’s a strong favorite to complete a head and shoulders before a breakout from both the H&S and rising megaphone to return to the bottom of the red megaphone.

From there, the dollar can return to the top of the flat-topped megaphone for a breakout into a big move up, or it can break out through the formation bottom for a return to about 80.

Potential USD H&S with Triangle Right Shoulder

Potential Dollar H&S with Triangle Right Shoulder

Potential Dollar H&S with Triangle Right Shoulder

The dollar may be putting a triangle right shoulder on its potential head and shoulders.

A right shoulder triangle, if it actually completes, would be a huge favorite to break out downwards.

Target would be VWAP of the Red Megaphone

Target would be VWAP of the Red Megaphone

The dollar formed a megaphone back in 2013 and the recent melt-up was a trip to the megaphone top.  The minimum retrace from up here would be to the megaphone VWAP at roughly 83.

In theory, the dollar could go all the way to the megaphone bottom, but with the megaphone this big the dollar is more likely to reverse at VWAP for a breakout upwards or start a new megaphone across VWAP.

The Euro Continues to Mass at Trend Line

The Euro Continues to Mass Just Beneath the Top of its Orange Falling Megaphone

The Euro Continues to Mass Just Beneath the Top of its Orange Falling Megaphone

The euro continues to mass beneath the top of its orange falling megaphone.

When a price keeps clinging to a line like this, it’s going to break out through that line.  The question is whether the euro is going to break out into a price channel melt-up set-up (green scenario), or break out to continue moving sideways and confirm a longer-term trading range (purple and pink scenarios).

A breakout through the orange falling megaphone top is a set-up to go long to at least the top of the silver price channel if that channel hasn’t been killed before the breakout.  Then we’d have to see what kind of channel retrace the euro puts in.  A retrace to the channel bottom would kill the potential melt-up set-up.

If the euro kills the channel before breaking out through the orange line, it’s probably forming a triangle.

Mini Sornette Bubble on Euro

There's a Mini Sornette Bubble on the Euro About to Complete Part 2

There’s a Mini Sornette Bubble on the Euro About to Complete Part 2

The euro is in Part 2 of a mini Sornette bubble.

It should retrace to the area of the lumpy top soon and then either reverse into a Part 3 bigger than Part 2 or take out the lumpy top low to head further down.

The euro had a potential price channel melt-up set-up on the chart. This bullish excess makes that set-up extremely doubtful.

Potential Euro Price Channel Would Likely Set Up a Melt-Up

Potential Euro Price Channel (Pink) - If It Holds, Could Set Up Melt-Up

Potential Euro Price Channel (Pink) – If It Holds, Will Likely Set Up Melt-Up

Euro futures are trying to set up a price channel (pink on chart). Their retrace target is still below, so it’s doubtful that the channel will hold, but if it does, it’s likely setting up a breakout into a melt-up (green scenario).

(h/t Bullethead for spotting the potential channel.)