Tuesday, January 12, 2016

USD US Dollar Index Daily Chart Sideways Symmetrical Triangle Big Move Coming

The US dollar index staggers sideways like a Times Square drunk. The brown sideways channel lines are in play. The channel through 97.4-100.2 is in play for over two months so the exit from this channel is very important. The pink box shows a high ADX confirming that the move higher in the dollar was a strong trend but that strong trend higher petered out in December. The ADX sits down in the cellar confirming a trendless sideways move in the dollar currently. Isn't interesting to see the firm mathematical proof that the USD is not in a strong upward trend but the universal consensus of traders, investors, analysts, strategists, economists and television pundits say the dollar is in a strong upward trend and will print higher all year long. Go figure.

The indicators are lining out sideways. The moving averages are lining out sideways. Price is lining out sideways. The blue sideways symmetrical triangle is in play. The vertical side of the triangle is about 3-1/2 points so a breakout to the upside, say from 99.3 targets 103-ish. A breakdown from the triangle at 98.5 targets 95-ish. USD is at 99.05 as this is typed teasing towards the top rail for another touch.

The apex of the blue triangle can hold at most about 7 or 8 more candlesticks which represents 7 or 8 trading days which represents any time between now and Friday, 1/22/16. A big move is about to happen in the dollar. Sideways triangles will sometimes print an initial fake-out move where it exits one side or the other of the triangle, and everyone thinks the decision is made, but then price quickly reverses, moves through the triangle and exits in the opposite direction for the real directional move so exercise caution for the days ahead. The move above 99 this morning may be a quick fake-out that recoils lower over the next couple days. The standard deviation bands (not shown) are squeezing in tight reinforcing the theme that a big squeeze move up or down is very, very near.

The oil charts indicate that a bounce is at hand. Ditto the ag charts and other commodities are in need for a bounce as well. This behavior hints that the US dollar should leak lower in conjunction with a commodities relief rally which would show USD price exiting the lower side of the triangle. Let the chart play out; it will likely tell you the direction answer this week. If down is the direction, a lower dollar will send the euro higher and cause grief for ECB President Draghi and European stocks.

There are couple interesting gaps lower while the top side is all buttoned-up without any gaps so price has no reason to move higher to fill any topside gaps but a door remains open to button-up business on the downside. A move lower in the dollar would be shocking to the  majority of market participants. If there is one thing that stock, bond and currency markets do, it is always strive to hurt the maximum amount of market participants as possible. If the dollar begins falling in the days ahead, the massive amounts of dollar longs are going to panic which may exacerbate a downside move. However, give the chart a couple more days or so since it will tell you the story more clearly. 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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