The markets continue to consolidate in deeply oversold dollar territory after last week's explosive moves. The dollar breakdown is making headlines in virtually every financial media outlet around the world and will draw more attention as the move progresses. This sort of media exposure is great for the forex firms, but tends to sway our beloved financial celebrities who we look to as an objective source of market analysis to the side of the emotional, trend-following masses. Essentially, when we are start seeing news stories about how to profit from the falling dollar on your local nightly news, perhaps it's time to look the other way.

We are patiently waiting to get long dollars, especially with the strong housing data out this morning, and will remain such until a premium trade setup presents itself. The USD/JPY trade idea remains valid, and we're going to add EUR/USD to the watch list.

We saw 5 waves up from the 1.2760 low and have possibly finished the B-wave correction after the 1.3178 high. C-wave could have just gotten underway and will take effect on the trendline break targeting A-wave low at 1.3086.

The trendline break should occur around 1.3135 and carry us down to test A-wave lows at 1.3086, as well as today's daily S1 at 1.3090. This is a critical support level so book at least half profits and move the stop to your cost. Should we catch a flyer, the June 2006 breakout level at 1.2980 is the final target.