Sunday, November 13, 2016

USD US Dollar Index Weekly Chart; Sideways Channel

The US dollar index jumps higher after the Trump election victory. Treasury, and global, yields run higher. Emerging markets sink. Utilities are bludgeoned as yields rise. Everyone and his bro now call for the dollar to take off like gangbusters to the upside. The dollar has already rallied for 7 months from the bottom rail, sub 93, to over 99, a +7% gain. The tight standard deviation bands squeezed out a price move higher over the last two months (pink arrows).

Price is nearing the top rail of that long-term blue sideways channel at 99.7-ish, let's call it one hundo to keep things easy. The US dollar index has moved sideways through the 93-100 range for the last two years. Over the last month, the RSI, stochastics and histo are neggie d hinting at some softness this week in price although keep an eye on the RSI since if it slides a wee bit higher the dollar rally can continue in the days ahead. After a pull back in this weekly time frame price will likely come back up for another high since the MACD line and ROC are long and strong. This may be when price teases and tests that top rail at 100, say a couple weeks out.

Over the last two years, the red lines show negative divergence which is not agreeable to a breakout and strong move higher in the dollar for the weeks and months to come. Trump's victory is a wild card, however, and his plans are viewed as inflationary that drive the dollar and Treasury yields higher. So the chart hints at buoyancy in the dollar for the next three weeks although a dip lower will occur within this time frame. At that time, say late this month into early December, the current expectation would be for the dollar rally to peter out and for the index to roll over remaining inside the channel.

The pink box shows the strong upside trend in place in late 2014 and early 2015. That strong uptrend ended in June 2015 and the dollar has meandered sideways ever since. The chart is absorbing that huge repricing move from 80 to 101. The ADX is down at 16 showing that there is no strong trend in place and the price is staggering sideways like a drunk in Times Square last evening. Price has violated the upper standard deviation band so a move back to the middle band at 96.46, and climbing, is on the table.

Dollar bulls will be extremely encouraged if the ADX moves above 20 especially above 25 and higher since that says an upside rally in the dollar is the real deal. For now, however, it does not appear that way. The USD wants to remain buoyant this month but then should relax lower in December and into the new year probably using the top rail of the channel as resistance. Keystone's 80/20 rule says 8's lead to 2's so above 98 opens the door to 102 so this must be respected especially if the Trump Rally continues but the current forecast would be for a top to hold in the dollar this month at this 99-102 area. 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.

Note Added on 11/14/16 at 5:19 AM EST: The USD is at 99.85 after printing at 100.04 about one-half hour ago.

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