Wednesday, May 15, 2013

$USD US Dollar Index Daily Chart Two-Leg Bull Flag Pattern

A few days ago the level to watch was 83.3-ish to see if the dollar would break above the bull flag to signal that leg two of upside is underway. The current print at this writing is 84-ish. The first leg (brown line) is 79.0 to 83.5, a 4.5 buck jump. Then the sideways to sideways lower textbook consolidation pattern forms, and now the leg two move from 81.5 begins. The target is 81.5 + 4.5 = 86.0. The green lines show the indicators are all long and strong wanting to see higher highs in the dollar after a pull back occurs.

This move is interesting in the context of the commodities theme over the last day. The stronger dollar will pound copper and commodities lower. The Empire Mfg data minutes ago points to continued weakness, thus, less need for commodities. Asia and Europe are in a funk. Electricity demand is down in China. So commodities receive a double whammy of lower global demand and higher dollar. Up to now the resiliency of the bulls is due to the markets ignoring commodity weakness. This is the biggest disappointmen for market bears since the commodity weakness began in February and the broad indexes should be moving lower in concert with the commodities. The central banker money, however, is pumping dividend stocks and sending equities higher forcing traders to ignore Dr. Copper and his friends.

The dollar weekly chart continues to highlight a sideways range through 79-84. Thus, if the dollar moves up through 84 on its way to 85, several handles higher are likely. If the dollar reverses, it will have to be from this 83.80-84.50 area so the next few days will be interesting. 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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