Monday, July 17, 2017

USD US Dollar Index Daily Chart; Oversold; Falling Wedge; Positive Divergence; Lower Band Violation; Price Extended to Downside

The number of shorts against the US dollar index is at a three-year high. The boat is fully loaded to the downside with the Wall Street pundits expecting a further drop in the dollar. You know what happens when the consensus moves in one direction, yes, the stock or index tends to do the opposite that is expected.

The USD is set up for a nice bounce in the daily time frame. RSI and stochastics are at oversold levels agreeable to a bounce. The falling wedge pattern is bullish. The indicators are universally positively diverged against the falling price (green lines) wanting to see a nice bounce in price occur. The USD has violated the lower standard deviation band so the middle band at 96.16 is on the table as an initial upside target. Price is extended below the moving averages and requires a mean reversion higher. All of these indications are bullish. Considering the strong number of shorts, once price begins to elevate it may shoot higher like a rocket as the shorts panic and cover. A higher dollar will likely boost emerging market stocks and small caps.

So the dollar bulls are likely winners in the short term in the daily time frame, however, the weekly chart remains weak. The stoch's are oversold on the weekly chart and agreeable to the bounce which will likely occur on the daily time frame as described. The RSI is not yet oversold on the weekly chart and the MACD line remains weak and bleak wanting to see lower lows in the dollar after the short term bounce occurs. 93 is a key support level. The USD monthly chart is favoring sideways movement with a slight downward bias.

Thus, the dollar is expected to bounce in the daily time frame, say it moves higher to the 96-97 level over the coming days or week or two but then price will likely roll back over again in the weekly time frame to come back down and test the lows in the 93-95 area say in early August. Keystone does not hold any positions in the dollar. 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 at 8:36 AM EST: The USD is printing at 95.14 receiving pressure from the dollar bears. What do you think will happen?

Note Added at 7:13 PM EST: The USD finishes the session at 94.90 with the dollar bears in control. Interestingly, the Russell 2000 small caps set a new all-time record so traders may be sniffing out a rise in the dollar.

Note Added on Tuesday Morning, 7/18/17, at 8:13 AM EST: Senate Leader McConnell cancels the proposed vote for the new Trumpcare healthcare bill called the Better Care Act. Two additional senators did not like the plan so it would not pass if put to vote. McConnell changes the strategy and will now seek a repeal vote for the Affordable Care Act (Obamacare). A repeal, if approved, will allow two years to come up with a replacement healthcare plan for the ACA. McConnell previously and unequivocally stated that he would not back a repeal bill. President Trump loses credibility since he bragged for the last year that the repeal and replacement of Obamacare would be easy and occur on day one of his presidency. Trump’s approval rating will slip lower in the polls. The republicans blew it by boasting for eight years that they had a great healthcare insurance bill ready to go that would replace Obamacare. That was a lie. They had no plan ready. Trump either blindly cheerleaded the new healthcare bill without ever understanding that there was no republican plan, or, he chose to lie about it to get elected. The president loses face. The demopublicans and republocrats are proficient at one task; lying. The US dollar index drops like a rock from 95.2 to 94.7 sending the euro currency basket higher. The euro moves above 1.15. The USD is down -8.2% from the top in early January. The Senate is not out of the woods since a repeal bill for the ACA may not have enough votes to pass. Obamacare may remain in place forever. The analysis above should hold but give the daily chart a day or two to price in this news.

Note Added on Wednesday Morning, 7/19/17, at 6:00 AM EST: The USD prints a low at 94.28 yesterday and is currently at 94.75. The ECB is on tap tomorrow morning. The euro moves inversely to the US dollar.

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