The USD Index looks like it is unstoppable, flirting with the 97.00 mark. Does this mean you do not have to analyze it anymore? Should you just do what everybody else is doing and go long as well? Well, you will be doing it at your own risk, because the Elliott Wave Principle provides a different insight. As the chart below will show, the USD Index might offer an unpleasant surprise.
The Wave Principle is a pattern-recognition method of analysis. When we see a specific Elliott Wave pattern, we have an idea of what to expect after it. There is one such pattern on this chart. It is called a triangle and serves as a “proceed with caution” sign to Elliotticians. The theory says that triangles precede the last wave of the larger sequence. The USD Index has a wave (4) triangle, preceding the last wave (5) of a five-wave impulsive sequence. That is why we believe the bulls should not be too confident, because the trend is likely to be interrupted by a pull-back soon.
