The U.S. Dollar Index recently has sported one of the clearest Elliott wave patterns among all the major financial markets.
Moreover, the Dollar Index has defied the majority at each big turn. This is why we follow trader sentiment so closely at EWI. We've learned that when the crowd overwhelmingly leans one way, they often do so at precisely the wrong time!
Want evidence? Okay, please take a look at this chart (data through Aug. 10):
From the 2009 low of 74.17, the greenback gained about 20% over a six-month period. Prices reached as high as 88.708 before the reversal began.
The August issue of The Elliott Wave Financial Forecast (published July 30) commented on that reversal, which led the buck down to 80.08:
"The index’s change of trend sent analysts scurrying for reasons why prices, which looked so positive just a month and a half ago, are suddenly dropping. Some cite concerns over China’s potential to sell dollars in an effort 'to rebalance its reserves.' Over the past 10 years, fear over Chinese dollar sales has accompanied nearly every single decline in the Dollar Index, so that’s nothing more than a rationalization to explain an errant forecast."
The Financial Forecast then gave the real reason for the Dollar's decline.
As we know, the greenback has made a turn upward since that 80.08 low. The question is: does the rally have legs?