Tuesday, September 2, 2014

USD Dollar Index Daily Chart Upward-Sloping Channels

The dollar is jumping higher today tagging 83 (the chart is one-day behind) at the top rail of the upward-sloping channel. The dollar has pierced the upper standard deviation band (not shown) so a move back towards 82.0-82.50 would be expected going forward. RSI, histogram and stochastics are negatively diverged wanting the dollar to pull back for a rest, along with the rising wedge and overbot conditions, but the MACD remains long and strong so a higher high should print above 83 in the day or days ahead before a more solid pull back occurs. The pink box shows a strong uptrend in place for the dollar since June (ADX above 25) but the 50+ level is very overextended.

Price is also overextended above the moving averages requiring a mean reversion. The weekly chart has more upside available but price has gone parabolic for the last two months and desperately needs a rest. The expectation would be for the dollar to trade through 82.3-83.6 for the coming days, a few weeks, call it about one month's time, and then trend flat to lower for the months ahead but the charts will need reassessed in a couple weeks time.

The higher dollar is smacking oil and gold lower today. The euro and yen are weaker. The dollar/yen explodes higher overnight now only a hair under 105. The weaker yen creates a strong up move in the Nikkei Index overnight. The big event this week is the ECB's rate decision and press conference on Thursday morning. Draghi's words will create a wild reaction in the euro and directly affect the dollar inversely. Traders are sending the euro lower anticipating stimulus but the October meeting is a more likely target for Draghi to fire the money bazooka. The level of shorts against the euro are at the highest levels in a couple years. Even the cab driver said he took his entire life savings and is shorting the euro so obviously the risk on Thursday morning is that Draghi under delivers and the euro catapults higher and dollar drops. This behavior would sync up with the chart above that will want a  pull back after the MACD line negatively diverges (which could set up over the next couple days). 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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