Pure Guesswork

Two weeks ago I posted a few charts showing a downward impulsive pattern with a 2.618 Fibonacci target at 75.77. We came within a few pips of that level on September 23. The pattern seemed to have some validity since, despite the overwhelming bearish dollar sentiment displayed in the financial press and blogosphere since that time, the index has continued to trade sideways since that low. Yesterday we bounced off it again.

A level like this (2.618 extension from a base pattern) is not some iimpenetrable barrier; it should rather be seen as an area of instablitlity, where a trend can suddenly find itself without the energy to continue. For the last two weeks that is what has happened with the decline of the dollar index. To call the reaction of the market to this level a "bounce" is being rather generous--it has been rather a listless sideways action. That raises the odds that this is a pause in the dollar's decline rather than a turning point. Yet what should be emphasized is the disconnect between the sentiment expressed vocally these last few weeks and the lack of corresponding movement in the dollar index itself.

Here are the weekly and daily charts as of this morning, showing the extended Fibonacci pattern first explored 2 weeks ago:--

Weekly:

And daily:

And then, just for the entertainment of USD uber-bears, a chart showing the next downward target in this pattern, one which is extended downard 4.236 times the base pattern.

68.91. Happy now?