Short-Term and Long-Term Dollar, Euro and Yen Outlook Aligned

The dollar and euro are both forming tops, but the dollar is forming an intermediate-term top within a long-term bottoming pattern, while the euro is forming an intermediate-term top within the last moves of a long-term topping pattern.

The dollar is completing a wave up within a six-year triangle.

Six-Year Dollar Triangle on Long-Term Chart

Six-Year Dollar Triangle on Long-Term Chart

The six-year triangle is a Neely bottoming formation within a four-decade falling wedge that is closing in on a breakout upward.

Falling Wedge on Dollar Historical Chart

Falling Wedge on Dollar Historical Chart

The dollar is forming a short-term megaphone top to complete this wave up within the six-year triangle. The megaphone top requires a bottom around here and then one more wave up to complete the formation. The final wave up should end with a spike through the top of the formation. This spike top should take the price to the top of the six-year triangle.

DX Megaphone Top Within Six-Year Triangle

DX Megaphone Top Within Six-Year Triangle

Note the smaller megaphone inside the larger one. The bottom formed by that megaphone here will determine the bottom line of the larger megaphone. The price just kissed a price channel bottom and/or strong trend line, so the low of this move down is likely in.

DX Friday Bounce Off Channel Bottom

DX Friday Bounce Off Channel Bottom

After completing the megaphone wave to the top of the six-year triangle, the dollar requires a wave down within the six-year triangle to complete the formation. That wave down will be working within the established megaphone formation. That means the wave down will make it to at least the megaphone VWAP in roughly the center of the formation, or it will break out through that VWAP with a target of a breakout through the bottom of the megaphone to somewhere near the bottom of the six-year triangle.

The euro seems to be forming a complementary megaphone formation with a complementary internal megaphone. I’ve been drawing the larger megaphone differently in charts posted earlier, but to be in alignment with the dollar it has to be as drawn below. Euro futures have been struggling to get to the top of their internal megaphone. The high formed here for the internal megaphone will determine the top of the larger megaphone formation.

Euro Nested Megaphones

Euro Nested Megaphones are an Extending Final Wave of a Larger Topping Formation

This megaphone is an extension of the final wave up in a euro six-year topping triangle.

Euro Long-Term Topping Formation

Euro Long-Term Topping Formation

Yen futures have been working on a triangle for six months.

Six-Month Yen Triangle

Six-Month Yen Triangle

An historical chart shows that the USDJPY is forming a bottoming pattern—likely a falling wedge or an inverse head and shoulders—after a long move down.  Right now the USDJPY is roughly at the mid-point of a move up within this bottoming formation.

Historical Chart USDJPY

Historical Chart USDJPY

To me that six-month triangle is a classic mid-point flag in the USDJPY move up within this bottoming formation.

Within that six-month triangle, the price has been forming an ending diagonal on the last wave up. This may complete with a bit of a sideways move, like a small H&S, but it supports a short-term dollar bottom here.

Yen Topping Formation within Six-Month Triangle

Yen Topping Formation within Six-Month Triangle

What all this means is to look for any set-up to get long the dollar and short the euro and yen right now for moves within longer-term incomplete sideways moves, with breakouts from the sideways moves likely not that many more months away.