Monday, December 12, 2016

USD US Dollar Index Daily Chart; C&H; Expansion Pattern; Negative Divergence Developing

The dollar has been on a tear higher since the May bottom. The oversold conditions, falling wedge pattern and positive divergence across all indicators causes the bounce in early May. The blue cup and handle (C&H) pattern is in play. Price broke out from the 97 level and then came back in early November for a textbook back kiss, and then took off higher. The upside target for the C&H is the 101.4-102.0 level which is achieved satisfying the pattern.

The brown lines show an expansion pattern in play. Price tagged the upper rail and a move to the lower rail at 97-98 over the coming weeks and months is on the table. This outcome would disappoint the huge majority consensus that says the dollar will continue higher going forward. The cab driver told Keystone this morning that the USD was going to the moon.

The red lines show all the indicators running out of gas unenthusiastic about printing higher highs compared to one month ago. The red lines for the indicators are negatively sloped but that is not negative divergence. You have to have price making a matching or higher high to create the negative divergence in the indicators. Price is in the neighborhood of the prior highs and may be close enough for government work especially with the indicators unable to move higher.

Nonetheless, watch to see if the neggie d prints. If the USD prints 101.80102.20 and the indicators all remain negatively-sloped as shown, and do not move above the thin horizontal red lines, the top is in for the dollar and it will begin moving sideways to sideways lower in this daily time frame. That will make 95% of Wall Street scratch their heads. The door is open to another high at 102-ish where price will likely roll over to the downside, or the downside will begin at any time.

That top rail on the expansion pattern has to be respected if you see the dollar moving above 102. Of course the euro currency basket is the inverse of the chart above. So th euro price is down matching the lows from a couple weeks ago with positive divergence showing on its chart. Going forward on the daily basis, the euro should float higher and US dollar leak lower. The dollar is at 101.37 on Monday morning. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.