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The US Dollar Index extended its losses and fell even lower yesterday, now through the channel support line which puts markets into an even more bearish mode than beforehand.

US Dollar Index Elliott Wave S&P October 17 2012
US Dollar Index Elliott Wave S&P

We believe that wave 5 is underway which should unfold in five waves towards 78.00 projected zone. Any short-term bounce will look for a reversal from a trend-line; as broken support becomes resistance.

S &P Elliott Wave Analysis October 17 2012
S &P Elliott Wave Analysis

We think that the S&P500 will continue higher and the reason is a three wave of a pull-back from latest 1474 high – which we know is a structure of a corrective movement. Ideally, that was wave 4 of an incomplete five wave rally (in red) wave 3.

If we are correct, then price will move back above 1480 in the next few weeks that will cause even more bearish pressure on the USD.