The main hourly wave count from our last analysis was invalidated as the Dollar continued lower.

We present two possible wave counts today. The structure is not as clear as we would like it to be, we do however expect these are the two most likely wave counts.

Elliott Wave chart analysis for the USD Index for 25th January, 2012. Please click on the charts below to enlarge.

Main Wave Count

The dollar is seen within wave 3 blue to the upside.

Within wave 3 blue waves i and ii pink are seen as complete. Within wave iii pink waves (i) and (ii) green are complete. Wave (iii) green is subdividing into orange degree.

Within wave iii orange we expect waves 1 through 4 purple are complete and upwards movement should be seen to complete wave 5 purple and complete wave iii orange.

Wave 5 purple is expected to unfold as an ending diagonal requiring all sub waves to unfold as zigzags. The hourly wave counts look at this in more detail.

At 83.08 wave iii orange would reach 1.618 the length of wave i orange. This target seems to be the most likely as it would allow enough room for a five wave structure to complete wave 5 purple.

At 83.31 wave 5 purple would reach 4.236 the length of wave 1 purple and this target is 0.23 above the target for wave iii orange at 83.08. This increases the possibility of wave iii orange completing here within this target zone.

At 83.26 wave (5) aqua would reach 1.618 the length of wave (3) aqua. This is within the above mentioned target zone.

Movement below 79.52 would invalidate this wave count as wave (4) aqua may not move beyond the end of wave (2) aqua.

Within the ending diagonal for wave 5 purple we can count zigzags for waves (1) through (3) aqua complete. Wave (4) aqua has very likely completed a zigzag as well.

We therefore expect to see upwards movement within a zigzag for wave (5) aqua.

A ratio within wave (4) aqua is: wave C red is .01 shorter than 1.618 the length of wave A red.

The trend channel constructed about wave (4) aqua is a best fit channel to contain most of the price movement. The upper trend line of this trend channel has now been broken and we have a number of hourly candles above it. This may indicate that wave (5) aqua is underway.

Movement below 79.60 would invalidate this wave count as no second wave correction within the zigzag for wave (5) aqua may move beyond the start of the first wave.

Alternate Wave Count

This alternate wave count expects that wave iii pink is complete and that the Dollar is within a much larger correction for wave iv pink.

Ratios within 3 blue are: wave iii pink is .31 shorter than 1.382 the length of wave i pink. Within wave iii pink wave (iii) green has no adequate Fibonacci ratio to wave (i) green and wave (v) green is .07 shorter than .382 the length of wave (i) green.

Wave iv pink is likely to move price sideways for the next week or two before a final impulse for wave v pink to the upside to complete wave 3 blue.

Movement below 79.52 would provide confirmation for this alternate as the main wave count would then be invalidated.

Movement below 78.86 would invalidate this wave count as wave iv pink may not move into the price territory of wave i pink.

If wave iv pink continues to move sideways then we may need to run both the wave counts together as the invalidation point of the main wave count may never be reached.

Both the wave counts expect that we should see short term upwards movement within the Dollar, this upwards movement may be very limited and more of the structure is required to determine which of these two possibilities are more likely.