The US dollar put in a right shoulder early April at 80380 as it tested its March highs and failed. This created a head/shoulder pattern and the market was ready to move lower. Sellers of this level saw the market fall down to take out its April lows and take out its head/shoulder neckline from the Feb-April lows. In late February when the USD was breaking to test the 7800 level, the market was saved and taken into a short squeeze to test the year highs which failed and in turn became the head for the head/shoulder pattern. The pullback was once again defended late March which lead to a retest of the March highs in turn creating the right shoulder. The market failed to take out the March highs and built this right shoulder leading the dollar to fall down and put in new month lows for April along with taking out its Feb-April head/shoulder neckline. Just when all systems were go for a break down to take out the February lows and retest 7800, market forces have once again come in to save this from dropping as the market found support from its August 2011-October 2011 trendline. This has led the market to bounce off this trendline and squeeze late sellers as the market has now traded through its right shoulder highs of 80380 with highs of 80415. This squeeze is now retesting the "head" of the head/shoulder formation to see if this pattern is any good. A move past the March highs (head) is needed to retest the year highs of 82045 and try to continue moving higher. At this point the test of the head needs to show failure for the market to move back lower and take out the April lows of 78665 to move toward 7800 and eventuallly complete this head/shoulder target down to 7500 which fills the gap from October of 2011. This failed break below the head/shoulder neckline late April of 2012 and squeeze back higher is a perfect example of why its important to be ahead of the street on these moves and be sellers of right shoulders so when the neckline is broken, profits are being taken and runners are left looking for the move to complete the downside target. Sellers who came in late on the break of the head/shoulder neckline are now being squeezed as the market brings pain to these shorts, looking to see how much further it can go.
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