A different way of looking at the dollar's chart

There may be different ways to interpret the chart of the dollar than certain other Elliott Wave analysts may be showing. The $USD chart below (which includes data just through yesterday - doesn't show today's rise in the dollar yet) has my markings of various angles and Fibonacci retracement levels. I've also added just for this post some EW labels in which the first ABC (that started in mid-July 2008) is a zigzag wave "1", then there's a drop into wave "2". Then the next ABC is another zigzag for wave "3". You'll notice that the time spans appear to be equal for the first A and C wave. And then, that the next ABC sequence appears to occupy a smaller fraction - .786 perhaps? - of the first ABC wave "1". If this proves out to be a valid Elliott Wave diagonal, then it would see another zigzag ABC wave "5" up. (It might need just a bit more down to complete the wave "4", and if so, that could be to the trendline I added which happens to be close by the 200-day moving average.) The amount of time for the wave "5" up should be approximately .786 of the time it took for the wave "3" up (perhaps peaking into late May), and its peak price would be expected to occur along the line connecting the tops of waves "1" and "3" (although it could fall short of that line or overshoot it).

There can be other interpretations as well. One would be that the mid-July 2008 low bottomed a very shallow wave 2 from a leading diagonal wave 1, that the first wave A is really wave 3, and that the wave C topping what I marked as wave "1" is really a wave 5 peak. In that case, the rise that I marked as wave "3" could be a B wave instead and we'd expect more of a drop to complete a C-wave from the expanded flat. It doesn't look much like a classic EW impulse however. Also, I'm aware that EWI has it marked differently, I just think that their marking doesn't answer some of the questions that can be raised. Furthermore, I think that the diagonal idea I put forward here has merit because of the wave structure's apparent regularity in terms of time, and wave form. The one thing I cannot answer is just how a diagonal would fit into the larger monthly and yearly charts of the dollar (for example, could it be a C-wave finishing a flat?). The wave structure from early March through mid-July, 2008, could be interpreted as a leading diagonal - either an A wave followed by the B-wave low and then the rest is a large C - but those proportions wouldn't seem "fitting."

If an impulsive count applies, then here's another chart with a different count applied. It can also imply that we see lower levels in a corrective pullback - or, it can also signify the end of a much larger C wave (if that somehow fits the larger monthly/yearly pattern).

I do rather like the potential diagonal in my first chart above, if only because of the apparent time relationships which do tend to play a part in diagonal structures. (Information on Elliott Wave diagonals is posted at my trading education site, the link in the opening paragraph at upper right of this page.) But we will know if the diagonal isn't correct if it violates the hypothetical trendlines I marked on the first chart (the one that connects waves "2" and "4" in particular, and then also the one connecting waves "1" and "3" unless it's simply an overshoot in a diagonal fifth wave).

I haven't really mentioned the idea that it could be either a leading diagonal or an ending diagonal. I've tended to treat it in this discussion as an ending diagonal, because of the way I see the zigzag regularity of those waves. I don't think it really has the structure of a leading diagonal. Either way, if it continues to trace out a diagonal pattern, we'll need to be prepared for a dramatic drop, one that would be even more dramatic than the one we saw last week.