- New Science in old markets -

$ makes a top extension but don’t sell it – maybe buy £

The €uro has been weak and now the €/$ pair made a bottom extension yesterday at a daily scale. The  corresponding strength in the $ has also made a top extension in the $ index. These are essentially the same signal:

30-07-2014 11-35-23

There may be more $ strength (and so € weakness) to come however as both these instruments have recently broken from weekly-scale compressions. The $ index has not yet broken, as we are only half way through the week and such breaks must be confirmed by a weekly close outside the compression:

30-07-2014 11-52-32

All this means that a dip is likely in the $. In cases of time-frame conflict like this, we generally defer to the longer term signal, so do not recommend selling the $/buying the € here to try catching that dip. Instead we would buy the $ and sell the € on any bounce back toward the compressed levels of ~ $1.3550.

There may be a trade to do here though, as the £/$ may strengthen. It has been in a strong uptrend, only dipping from some top extensions at the beginning of July and should benefit disproportionally from any temporary $ weakness. Buy it.

30-07-2014 12-10-07