When a trend comes to an end: the US Dollar top is pending

In December 2013 an investment in US Dollars was initiated. The exchange rate  at that time was 1.40 US Dollars per Euro. Today, after 16 months of holding, the investment was finally liquidated at 1.055. Back in early February, when the price was 1.13, a price projection for a bottom at 1.02 was suggested based on the Elliott Wave count. It eventually reached 1.049 last week, just 290 pips from the projected bottom. Although the projection proved to be slightly inaccurate, additional 750 pips of profits were achieved. No one knows, the US Dollar might reach new extremes and confirm the projection. The risks ahead, however, do not justify holding the US Dollar any more.

An old saying suggests: “The trend is your friend until it ends.” There is overwhelming evidence that my friend is going to betray me soon. The bottoming process seems almost completed for several reasons:

  • First, clear five ways are already completed for a wave C. When a five-wave sequence is completed, a change in the trend is pending.
  • Second, the sentiment against the Euro is crazy negative. Financial media are projecting parity, the Greek drama is in the air, no growth in the Eurozone, deflation fears, etc. Play smart and stay away from the herd. Negative news are a signal for a bottom and the Euro will start rising soon.
  • Third, momentum indicators show that the trend is overly stretched and exhausted. There are simply no more sellers to sell.
  • Last but not the least, there are five ways at a small time frame indicating an impulsive increase in the value of the Euro.

It is time when everyone is greedy and convinced in the strength of the US Dollar. Get ready for the old play where the herd (the US Dollar bulls and Euro bears, respectively) will get slaughtered. Markets are designed to inflict maximum pain to most of investors all the time. Stay safe and stay away from the madness.