Monday, July 8, 2013

USD Dollar Index Weekly and Daily Charts

February was the start of mixed asset relationships in the markets. The dollar index started moving substantially higher which slapped commodities to the downside across the board. The expectation is that the equities markets in general would move down with commodities but this did not occur. The central banker pumping is too powerful and when the BOJ hit the afterburners to weaken the yen even more in February-May, the broad indexes launched to new all-time highs due to the easy money and the negative affects of lower commodities is ignored. Markets continue sorting out the relationships between equities, commodities, the dollar, the euro, and Treasuries.

The weekly chart shows the dollar now printing at highs not seen for 3 years. The chart has a sideways look. The daily chart shows an expansion pattern, a megaphone where the dollar should float a bit higher but likely move lower again and establish a sideways range for the weeks and months ahead. The pink bull flag was highlighted a few weeks back but Keystone questioned its oomph due to the negative divergence, and the divergence won out spanking price lower from late May forward. The dollar has leaped higher again, however, and perhaps now will reach the previous bull flag pattern target of 86-ish.

Commodities remain weak although late last week started to move higher even with the dollar moving higher. Oil has decoupled from the dollar due to the Middle East turmoil. The dollar and oil are both moving higher when typically they move inverse to each other. The jury remains out on the dollar-commodity-oil-copper relationships. Weaker commodities since February say that the global economy is very weak and that equities should not be printing new highs, however, that is what happened and equities continue to catch a bid, now on BOE and ECB easy money talk last week. The ECB dovish talk results in the euro collapsing which sent the dollar index higher. Traders are believing in the positive side that the global economy is recovering and that commodities will recover to reflect the path ahead. If the dollar index continues through 84-86 this will continue to apply pressure on commodities. At some point forward clarity will exist where either the weakness in commodities negatively affects the equity markets and verifies a slowing global economy, or, commodities recover and move higher to catch up with equities showing that the global economy is on the mend. For now, the negative outcome remains on the table. The dollar index, as well as other currencies, may perform a lot of sideways movement in the coming weeks. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.