Date: September 2012: USD INDEX: Follow Up of the Short Term EWP | The wave trading

The USD Index is now the strongest “partner” of the equity bulls (Well of course Ben is the chief commander of the Bulls Task Force)

Today I am not going to analyze the internal structure of the sharp decline nor the longer-term time frame potential scenarios.

I am only interested in finding out if price has established a short-term bottom that will allow a rebound with a potential target in the range of the 0.382 retracement. I doubt that price will be able to recover above the 200 d MA.

In my last weekend technical update I mentioned that in the area of the 0.5 retracement = 78.54 of the entire rally from the May 2011 low, there could be a bottoming attempt.

So far we do have an attempt although the absence on Friday of a bullish candlestick  does not inspire much confidence.

Being extremely oversold implies that odds of a rebound are getting larger but a catalyst is needed in order to trigger “short covering” which is always the initial step needed for an oversold rebound.

Maybe if Spain delays to formally ask for the bailout we could have a risk aversion move.