Here at Aspen Trading, we are tracking 2 technical Elliott Wave count scenarios for the Dollar Index (DXC) - both bullish and bearish. At this stage, DXC has held the forecast FSZ (Fib Support Zone) now the only question is whether or not the rally that develops (assuming it does) turns out to be corrective or impulsive.

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We are beginning to favor this 2 Hour DXC wave count not only when taken in a larger context but also from the headwinds the U.S. is facing currently:

- The Chicago Fed’s national activity index fell back below zero, which is consistent with below-trend GDP growth.

- Jobless claims, after an extended decline, have now started to rise and remain above 400K

- The two-month decline in the Philly Fed index is at recessionary levels.

- 'The drag on the economy due to the escalating fiscal mess in D.C. looms, GDP will need to grow above 3% in order to offset this impact'* - this is looking like a pretty tall order.

- Eurodollar futures have already started to push out the timing of the Fed’s first interest rate hike

Pairs like USD/NOK, USD/CHF, USD/SGD & USD/MXN barely rallied in the recent DXC rise and now seem poised to carve out new lows.

* Source: BCA Research

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