Friday, September 19, 2014

USD US Dollar Daily Chart Overbot Rising Wedge Negative Divergence

The explosive move higher in the dollar basket is astounding. ECB President Draghi is starting to fire the QE money bazooka and is promising big stimulus in 2015 which beats the euro lower and provides more dollar upside fuel. The dollar moves from 79 to 85, +7.6%, in only 18 weeks time; a pace of +0.4% per week. From the 79.7 low in early July, the dollar leaps +6.7% in only 11 weeks; a pace of +0.6% per week. The stronger dollar is pounding oil, gold, silver, platinum, copper and commodities lower.

The overbot conditions, rising wedge pattern and negative divergence create the initial spank down. Price is now at 84.56 (brown dot). The MACD line is rolling over and watch for the negative cross (red circle) to verify an ongoing pull back in the dollar. The ROC is already printing a weak and bleak profile wanting to see lower lows for the dollar after any bounce occurs. The blue channel is in play and a move back to 84-ish is a reasonable expectation over the near term. The 10-year yield, TNX, is rising with the rising dollar so a near-term pull back in the dollar may soften the yield rise.

The channel lines show the wild move occurring in the dollar with a sideways channel in play in May-June, then the launch develops legs in June-July with a breakout in late July. Then the dollar runs up an even steeper channel during July-August and starting late August goes parabolic running vertically higher to the current top.

The weekly chart is topping out but it still has some long and strong strength in the indicators so the daily chart should keep the dollar in check at 84.0-84.5 for a few days or week or two, then the upside should continue to print new highs, albeit not continuing the parabolic run, and then roll over in the weeks ahead. There remains dollar strength on the weekly basis but as the chart above shows, the dollar should pull back and digest the obscene move higher in the near term. 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.

Note Added 5:04 PM:  USD comes up today to print at 84.86 another equal or higher price with all indicators negatively diverged so the dollar would be expected to pull back for a much needed rest.

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