Posted on May 22nd, 2008 at 07:45 PM

I have been doing some work on the US Dollar index (DX A0). If the US Dollar can find support, that would lend itself to weakness for other currency cross pairs.

First, I applied two Fibonacci Ratio Derivatives (0.618 and its square root, which is 0.786) to the daily chart of (DX A0). That application looks as follows:

(click on chart for full view)

I then applied a Gann Box using a 'Natural Scale' for the range. Key support is at 71.875 and major resistance will be at 78.125. For future reference, 75.00 is also a very important level should we get there any time soon.

(click on chart for full view)

I am also inclined to believe that the USD will find some strength because if the Fed continues to cut rates the dollar will collapse and that is not something that I think the Fed wants to happen right now.

(click on chart for full view)

For those of you who are fond of candlestick bars, today's (22 May 2008) bar was a bullish reversal bar. Counting from the 8 May 2008 high, we have moved 10 bars. It is not unreasonable to expect a reversal after 8 to 11 days from high.

(click on chart for full view)

Going back to the British Pound Chart (GBP/USD), the ellipse has now closed and the high price (so far) was just shy of the price square out level. So it would appear to me that the 144 trading day level will be a hot zone. I have other cycles hitting on the 28 May 2008 time line. Watching for +/- 2 days around that date will be key.

(click on chart for full view)

Now it is just an issue of being patient and allowing the market to come to me.

Remember, trade what you see not what you believe.

Trade Well,

Ernest Osias.

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