Friday, May 31, 2013

USD US Dollar Daily Chart Bull Flag Sideways Channels

The dollar has been on the rise for the last couple years despite the Fed's QE. Now that about 50 nations are involved in the race to debase their currencies, the dollar moves up since it is the least dirty shirt in the hamper. The blue bull flag pattern is ongoing and targets 76 but as mentioned in the previous dollar chart/s the indicators are not enthusiastic for further upside. The 86 must remain on the table, however to complete the pattern.  Note the negative divergence over the last three months that creates the drop in the dollar over the last few days.

The blue channel at 79-84 carries clout since it has been in place for almost two years now. The surprising move for currencies such as the euro, dollar, and Treasury yields is that they may move more sideways over the next couple years than up or down. Since the ECB will likely cut rates again the euro will weaken and dollar will receive a boost. This, along with the dollar buoyancy due to everybody and his bro debasing, may provide the boost to fulfill the 86 target for the bull flag. In addition, this may create a more elevated sideways range through 81-86 for months perhaps years ahead.

February shows the frustration for the equity market bears this year. As the dollar started its climb, commodities are hit and continue to be hit. The weaker commodities should have sent the broad indexes lower but alas, the indexes keep making new highs. The broad indexes simply move higher on the Fed and BOJ actions, the weaker yen the main driver of the equity markets for the last three months and the sole cause of the new highs in the SPX.  The correlation of weaker commodities and weaker equities should reconnect moving forward and the elevated dollar will continue to create pressure on commodities. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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