Friday, October 25, 2013
USD US Dollar Weekly and Daily Charts Long-Term Sideways Channel Falling Wedge Oversold
These days, the euro is popping and the dollar dropping. The Fed's insistence on keeping the stock market elevated to benefit their rich friends through money-printing beats the dollar lower. Fed's Fisher, an avid hawk, now says QE will continue. The Washington political clown show continues into 2014 so traders are 100% convinced that QE tapering will not occur until March 2014 at the earliest; others are saying next summer. This is absolutely shameful, but, no one cares. The beating of the dollar then pops the euro. Europe will become concerned over the higher euro, now at 1.38, since this bites into the retail sales (Asian tourism drops off and thus luxury sales) and hurts the exporters and manufacturers, all at a time when Europe needs to dig out of a deep economic hole.
The weekly chart shows the long-term channel continuing through 79-84 for the last couple years; price now at the lower rail. The green falling wedges are a bullish set-up. The daily chart is positively diverged across the indicators, with oversold conditions, so a bounce in the dollar is expected in the daily time frame. On the weekly chart, however, the indicators remain weak. The stochastics are buried in the oversold area which will cause a bounce in agreement with the daily chart but then price will want to come back down again in the weekly time frame. The current dollar lows are not below the January lows as yet so positive divergence cannot exist, but the chart hints that the dollar will be basing in this 78.5-79.5 area over the next 1 to 3 weeks, perhaps one month. The ADX is subdued despite the big drop from 85 to 79. If this collapse in price was a strong trend, the ADX should be in the 20's and 30's right now but instead sits at a paltry 16. This hints that the down move is not a strong trend and makes sense since the beating in the dollar over the last 3 months is mainly due to the Washington and Fed clown follies.
Projection is for the dollar to base and move higher while the euro tops and rolls over to the downside. Keystone is currently in EUO which is a 2x ETF that shorts the euro. UUP is an ETF that longs the dollar and there are many other short euro and long dollar plays available in the stock and option markets. If the dollar does strengthen moving forward into the end of the year, this should maintain pressure on copper, commodities, oil and gold. Thus, a play like SMN, which is a 2x inverse ETF against basic materials, which Keystone holds long, would benefit with the stronger dollar. Keystone continues to project lots of sideways ahead for currencies and Treasury yields, perhaps for months and years moving forward. 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.