Sunday, December 21, 2014

USD US Dollar Index 8-Year High Sideways Symmetrical Triangle Pattern Negative Divergence Developing

The USD has been forming negative divergence over the last few weeks but the projection was for higher highs on a weekly basis since all the indicators are not yet fully cooperating to provide a pull back. All indicators are neggie d (red lines) now except for the MACD line (green line) that remains long and strong. So a pull back is needed but the US dollar index will come back up to satisfy the MACD line which should firmly lock in the neggie d on the next high price print and allow a more substantive pullback ahead. Thus, one to three more candlesticks are needed for the MACD to turn neggie d which is one to three weeks time.

So playing the long side is not attractive for the dollar right now nor is the short side especially considering the parabolic move and upside momentum. In early January, however, a nimble short trader may give the short side a try once the MACD goes neggie d. Over the six-year time frame the MACD, stochastics and ADX are negatively diverged (red lines) hinting that lots more sideways is ahead with a slight upward bias on a multi-month and yearly basis. Thus, the dollar may trade soft in January-February but then recover and float upwards again into summer time. The key phrase is 'lots of sideways'.

The dollar prints at 8-year highs as shown by the green circles. Note that price is exploding higher similar to the 2008 action leading into that commodity collapse and market collapse later in that year. As soon as the Fed saved the day with the Keynesian QE1 in March 2009 the dollar collapses and gold sky-rocketed. Once money-printing begins the currency value drops as the supply of dollars increases drastically. The blue lines show a sideways symmetrical triangle with vertical sides of 16 to 18 bucks. Using 80 as the break-out, this opens the door to a dollar at 96-98 in the years ahead. In early 2015, however, the dollar will likely favor the 85-90 area before resuming the upside.

The blue circle shows the false breakout to the downside in 2011. This typically happens with a sideways triangle pattern. About one-half to two-thirds of the way through the triangle pattern price will typically break out one way or the other but this is a false breakout and once price returns inside the triangle the projection is that the true breakout will occur in the opposite direction which is what occurred. The pink box shows the ADX at 49 well above the 25 level showing the upside move to be a strong trend going forward. Mixing it all together and sprinkling magic dust on the analysis, the projection is for the dollar to move sideways to sideways higher for perhaps a couple years forward favoring the current level at 85-90 in early 2015 (due to the neggie d) then floating higher late 2015 and beyond. 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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