Trade # 32: USD/CHF Short (Update)

I am going to cover the short USD/CHF portion of my hedged trade at 1.1860. I will continue to hold my EUR/GBP short hedge for longer since its pattern remains bearish. I believe the USD could show quick short term weakness before it reverses to make new trend highs over the coming few weeks.

The above chart shows the USD wave count since it bottomed in March. I believe Wave4 is underway, which implies a thrust to 82-83 before reversing into Wave5. This would then be followed by a long correction.

I gave the USDX chart to help interpret this EUR/USD chart. Notice that price formed a triangular pattern, which many people will watch to help determine the EUR's next move. It is currently breaking to the upside, which I believe will cause the crowd to go long. However, from the perspective of USDX, we still need one more high on the index (meaning one more low on EUR/USD). This also makes sense because the final low is normally registered with MACD divergence, which has not yet occured.

EUR/GBP has finished it's ending diagonal pattern so it should reverse dramatically very soon. It is acting as a good hedge for my USD/CHF trade. I'm hoping that this is indeed an ending diagonal, versus the possibility of a series of 1st and 2nd waves (that would imply another huge bullish move is coming).

Finally, given that USDX should make a quick new trend low, I believe USD/CHF should at least test 1.1850 because it is highly correlated with EUR/USD. Therefore, I will cover my short @ 1.1860.

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