Sunday, August 14, 2016

USD US Dollar Index Sideways Channel

The US dollar stumbles along sideways. The ADX shows that the  parabolic move up in late 2014 early 2015 was a strong move higher but that petered out in May-June 2015 and sure enough, price staggers sideways trendless in a choppy pattern. The firm negative divergence across all indicators as price made a matching high in late 2015 guaranteed the smack lower as Keystone pointed out at the time, and which occurs.

The blue sideways channel at 93-100 is running the show for the last 1-1/2 years. Themove from this channel will be very important. In fact, lowering the upper trend line to the 98 level is a better upper range so the breakdown from 93, or breakout from 98, will determine the winner going forward. The dollar is in the middle at 95-96. The indicators are simply telling a story of a sideways stock pattern without any forecasting hints available.

Note the tight standard deviation band squeeze in the summer of 2014 which ignited the rocket launch parabolic move higher. Tight bands predict huge moves but not direction. Keep this in mind with the SPX daily chart that has tight bands right now.

The blue two-leg bull flag pattern is in play. For the first leg, price jumps from 80 to 100 for a 20 difference. Price is currently consolidating in the flag portion with a downward bias, this is textbook two-leg bull flag behavior. If price begins the second leg higher from 92-93, this targets 112-113. A breakout above 97-98 may tell you that a strongly higher dollar is on the way. If this occurs and price breaks above 100 it will be at 102-103 in a heartbeat and beginning the run to the bull flag target at 112-113.

The dollar story will be written at either 97-98 for the dollar bulls or at 92-93 for the dollar bears. 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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