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DXY, EUR/USD: Is USD On The Edge Of A Big

After some market storms, consolidation has been the name of the game for quite a few trading sessions.

The breakout is not too far for USD, argues the team at Goldman Sachs, and  EUR/USD could break out soon.

Here is their view, courtesy of eFXnews:

The USD index (DXY) dropped down to test the top of its old range; highs from Jul. ’12 to Jul. ’13 at 84.53-10 and the fact that it held this level well as support (mainly on a weekly close basis) indicates that bullish momentum is still very much intact, notes Goldman Sachs.

“Fom a wave perspective, price action since early-May looks like an incomplete iv of v waves. This pattern has been replicated in several of the key G10 FX markets; namely EURUSD, USDCHF and NZDUSD. What it implies very simply is the following; i) there is one last leg to this impulsive up move necessary to complete the full v-wave sequence and ii) (more importantly) the underlying setup is by nature impulsively bullish and therefore likely to extend much further,” GS clarifies.

Dolar Index set for a breakout November 2014 Goldman Sachs technical analysis

Expanding on that in EUR/USD, GS notes that there’s now four of five waves apparent since the May peak indicating that the market seems to be setting up for at least one more impulsive move lower to take place very soon.  

Using wave i as a measure, an equal length wave v would theoretically take EURUSD down to ~1.2395 (at minimum). Moreover, it’s important to keep in mind that the broader rising wedge that completed back in March ultimately has a target back at the Jul. ’12 lows which comes in down at 1.2043,” GS projects.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.