In the last major update I posted on the dollar [see: Update – July 17, 2012], I argued that DX had pretty much run its course at 83.255 and would be heading down to tag the bottom of one of two channels it had been tracking: a steep purple channel at around 81 or the more mellow white channel somewhere around 79.30.

Five sessions later, DX reached 84.245 (a new 2+ year high at the rising wedge apex) and promptly plunged to our first target and paused.  Two long weeks later, it broke loose and dropped almost exactly to our second target — pushing slightly below our 79.30 target to 78.975 on Sep 14.

continued…

This represented the Fib .886 retracement of the last rise (from 78.12 to 84.245.)  We pronounced the drop over last week, and in fact prices have risen since to 79.755.

We have yet to break out of the narrow red channel that guided the downside so effectively, but it’s in the cards for sometime very soon.  Note that last week’s bottom reached several important points of support.  First, a look at important fan lines from the recent highs and low.

The channel picture is no less compelling.  First, the big picture…

and, a close up.  By my count, DX bottomed out at the largest (purple) channel’s midline, the white channel’s lowest bound, the middle-sized (purple) channel’s lowest bound, and the small red channel’s lowest bound.  This is an over-abundance of support that, in and of itself, should send DX sharply higher in the near term.

Last, the harmonic picture is clear.  DX just completed a Bat Pattern to the downside that indicates higher prices.  In my estimation, this occurred in the midst of the C-D leg of both the large Bat Pattern set up by the June 2010  to May 2011 decline (88.905 to 72.86) and the Crab Pattern generated by the Jan to May 2011 decline (81.635 to 72.86.)

I’m still looking for a payoff to the .886/1.618 at 87.05-87.07.   The big question is the time frame.  I think we’re due for an equity sell-off in the very near future, but that TPTB will do their best to stabilize the markets prior to the elections in November.

Under normal conditions, this would mean DX is due to continue higher now, pause or pull back a little, then continue (ultimately) higher to 87 after the election.  The white channel reaches 87 around February of 2013, a time frame that works for many of my charts for a more serious correction.

Look for DX to reach 81.8 – 82.0 within the coming week or two.  Good luck to all…