Sunday, February 26, 2017

USD US Dollar Index Weekly Chart; Sideways Channel Breakout; Potential Tweezer Top

The US dollar index is watched closely these days. After President Trump was elected in November, the dollar sky-rocketed as everyone jumped on the inflation train that was leaving the station; from Christmas to present they are jumping off the train. The dollar is buoyant but has printed a potential Tweezer Top over the last two weeks with the long shadows on the candlesticks (little brown circle). Of course, you do not know if it is a tweezer top until a breakdown would occur but it puts you on guard for further weakness in the dollar. The weak and bleak MACD line and stochastics, and the stoch's also dipping into bear territory under the 50 level to 47.35, hint at further weakness.

The red lines highlight the top call by Keystone as last year ended and this year began. That was when the sentiment was off the charts that the dollar would run strongly higher with analysts calling for 110 and 120 in the near future. Instead, as is always the case, the consensus was wrong, and the dollar retreated to under one hundo. The dollar bounced from 99.7 the upper channel trend line. This is a textbook back kiss and encouraging for dollar bulls. Price bounces indicating that it prefers to go higher, however, after three weeks, price is hesitating with the tweezer top.

Price violated the upper standard deviation band so it came back to touch the middle band and is hugging this 20-week MA at 100.59. The downside support to watch is 100.59, 100.00, 99.7 and 99.3. Under 99.3 and the dollar likely commits to traveling back through the sideways blue channel at 93-100 for the months ahead. This would be in keeping with a disinflationary and deflationary theme in markets.

The standard deviation bands are starting to squeeze in tight and will probably be very tight when Fed Chair Yellen takes the podium on 3/15/17, and, like Nero at the ancient Colosseum, will stand, extend the arm outwards, and point the thumb up or down determining the fate of the dollar and of global markets. The central bankers are the market.

If the dollar bulls can send price above that tweezer top at 101.80, the dollar bulls will rule and price will seek out a double top, or M Top, at 103-ish, where the chart can be reassessed. The expectation in the near-term would be for the dollar to come back down to test that 20-day and decide to bounce, or die. The tweezer top says a move lower is on tap. If price stays above 100.59, the dollar bulls will win out in the short term. 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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