Thursday, October 15, 2015

USD US Dollar Index Daily Chart Death Cross and XEU Euro Daily Chart Golden Cross

The clock just fell off the wall in ECB President Draghi's office. Europe began an obscene Keynesian quantitative easing program this year to pump their stock markets higher. The ECB QE is intended to push the euro lower so manufacturing and export industries receive a boost and help jump start the euro zone economy. With the Volkswagen scandal ongoing, exports need a shot in the arm especially Germany which is Europe's number one exporter. The lower US dollar index, however, due to the Federal Reserve not hiking rates until well into 2016, sends the euro higher causing Draghi many sleepless nights.

The USD prints a death cross today with the 50-day MA stabbing down through the 200-day MA which forecasts a lower dollar ahead. Typically, since it takes many weeks and months to create a negative cross, price will bounce once the cross occurs. Thus, the dollar may bounce from that lower channel line. The death cross indicates a lower dollar is expected for the weeks and months ahead as long as the cross remains.

Conversely, since the US dollar index and euro currency baskets are weighted 40% or more with each other's currency, the dollar and euro move inverse to each other as the charts display. A higher dollar results in a lower euro and a lower dollar results in a higher euro and visa versa.

Therefore, the euro prints a golden cross with the 50-day MA moving up through the 200-day MA. Typically, since it takes many weeks and months to create a positive cross, price will retreat once the cross occurs. Thus, the euro may pull back down from that upper channel line. The golden cross indicates a higher euro is expected for the weeks and months ahead as long as the cross remains. If Draghi becomes more aggressive with QE to push the euro lower, the US dollar index will move higher. 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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