US Dollar Index Daily Chart; Upward-Sloping Channel; Price Extended

In recent days, the currencies are getting bounced around on the trade talk rhetoric. World leaders are meeting this weekend at the G-string 7 in France.

In a tweet on Friday, President Trump 'hereby ordered' American companies to move their companies out of China. The comment tanked the US dollar that already had a downward bias from Fed Chairman Powell's dovish speech from Jackson Hole, Wyoming. You see the red candlestick. The markets are jumping to and fro on the trade war drama. As US dollar and stocks collapsed on Friday, traders were seeking the perceived safety of Treasuries and the Japanese Yen.

The green upward-sloping channel tells the dollar's story over the last year; choppy whipsaw trading with an upward bias. As the dollar came up for the matching high over the last month, and price tests the upper rail of the channel, the chart indicators were out of gas. The red lines show the negative divergence so there was no longer any fuel, in the daily time frame, to take the dollar higher. The neggie d slapdown occurs.

The blue boxes show the prior times when the dollar price was extended to the upside above its ribbon of moving averages (price is above the 20-day MA above the 50-day above the 200). Price typically needs to mean revert under these conditions, and always does. Note that for the prior times, the dollar has ran down to or near, the 200-day MA which is now at 96.73. The drop in late April was different with price coming down to kiss the 50-day MA and then recovering when it made its bounce or die decision (purple circle).

Thus, every prior example shows a mean reversion occurring off the price extension and every case took the dollar at least down to the 50. The 50-day MA is at 97.08. The RSI slips into bear territory sub 50%. Keystone is not playing in the currencies nowadays. 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.