USD US Dollar Daily Chart Sideways Range Potential Bull Flag

The currency markets continue to adjust in response to central banker intervention. The pound, U.S. dollar, euro and yen are all key. The dollar basket chart above is moving through a 81.6-83.2 sideways range for the last 2-1/2 months. The green lines show the positive divergence bounces and the red lines show the negative divergence spank down. The indicators favor sideways action ahead with an upward bias. Note the confluence formed by price, the 20-day MA and 50-day MA at 82.36-82.55. This S/R level is important. The dollar is printing 82.12 right now so the dollar bears are happy. A move up through 82.60 would encourage the dollar bulls.

The euro and dollar are in sideways moves. The weaker yen (stronger dollar/yen) is key lately causing the buoyancy in equity markets. Note the large up in the dollar in February and March which corresponds to the collapse in copper, oil and commodities, however, surprisingly, the broad equity markets ran higher instead of selling off as would be expected. This behavior illustrates the power of the Fed and BOJ easy money policies that override fundamentals and simply push stock prices higher. Commodities will weaken again if the dollar decides to break up through the confluence and head higher perhaps having a greater negative effect on markets the second time around.

Note the thin pink lines that show a potential bull flag pattern. The sideways to sideways lower consolidation would be finishing right now, forming the flag, with price starting the second leg higher.  The first leg is from 79.0 to 83.5, 4.5 points, so if the second leg has begun from 81.5, the target for the dollar is 86.0 (81.5 + 4.5). Considering that the euro may have a sideways to sideways lower bias since Draghi must lower rates to stimulate growth, this action would help the dollar break out to the upside. 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.