Monday, July 4, 2016

USD US Dollar Index Daily Chart Inverted H&S

The inverted head and shoulders (H&S) pattern is of interest with the dollar. Price is below the March and prior numbers and the low dollar for the last four months fuels the upside in commodities which pumps oil, energy, gold and other commodity stocks higher, which pumps the broad stock indexes higher. The inverted H&S, however, says that the US dollar may be in the mood to travel higher which would make the commodities sad.

The green lines show  a neck line at 95.8 and head at 92.6 so that is a 3.2 difference. Thus, the upside target is 99 (95.8+3.2). Using the back of the envelope, you can call the neck 96 and the head 92, that is a 4 difference, so one hundo would be the target. The upside targets are in play if the neckline is broken, which it is, but price is creating drama at the neckline. The dollar will bounce or die from this level this week and that will determine the viability of the inverted H&S.

For the sake of discussion, the blue dots show the potential entry points for a long dollar  play. Typically the breakout is bot, then price typically spikes and pulls back, which it has. This is the second entry area. Then, price will gather up a head of steam and begin moving strongly higher. When price takes out that initial spike high that is a third potential long entry area. Of course if price collapses from here all bets are off. Then if price makes another run at taking out the neckline all the same analysis would be in play again.

The black circle shows the death cross that led to this stagnation in price. The 50-day MA is curling flat to higher so it may want to come up for a golden cross in September. The 200-day MA at 96.51 is key; price was smacked down from here last week. If price moves above the 200-day MA, dollar bulls will rejoice.

The gold chart is likely getting overdone (see previous charts)  to the upside so a move higher in the dollar would create the spankdown of gold. 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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