USD US Dollar Index Weekly Chart Overbot Rising Wedge Negative Divergence Developing Upper Band Violation Price Extended

The euro and dollar move inverse to each other. The euro drops to 1.0545 today and US dollar sky rockets to near 100. Momentum begets momentum. The stochastics and histogram want the price move higher to end (negative divergence), however, additional higher highs will occur after the initial pull back. The monthly chart has some upside juice in it as well. The price violated the upper standard deviation band (pink) so a move back to the middle band at 92 and rising is in play. Price is also extended far above the moving average lines desperately needing a mean reversion lower.

Note the tight band squeeze that started the big move higher (pink arrows). You always want to avoid shorting stocks with such momentum but if you are long the dollar take the money and run. If you are willing to ride out what may be a sharp drop, but then a return to higher highs again, you can stay long but much of this move higher has occurred. A breach of 98 opens the door to 102 (Keystone's 80/20 rule for prices). The move is powerful and a tricky call since you have ECB QE smacking the euro lower which sends the dollar higher.

A scenario ahead would  be the dollar pulling back sharply as the euro bounces but the dollar will move higher again say over the next 1 to 3 weeks after an initial slap down and print above 100. Once the indicators all turn neggie d with a higher high in price a more firm top will be in place say during March-April. Since the monthly chart has juice, the dollar would  be expected to then stall off the highs during April-May but then move higher to make new highs say in May-June so the monthly chart has a chance to top out.

The dollar is not a good short since you want to typically avoid shorting momentum but it is more of a sell the long position trade right now. If you enjoyed the ride, cash out and look elsewhere for trades. The dollar may play around at 96-103 into summer time but the action will likely become very choppy going forward and if you stick around in this trade from either perspective it is typically the action that will chew up bulls and bears.

The euro chart is the inverse and all the same analysis holds only the mirror image.The euro should receive a quick recovery rally but will then drop again for new lows, then that will create a more firm bottom say in March-April. Then multiple weeks will likely create ongoing buoyancy int eh euro but then moving towards summer time the euro will make new lows again to satisfy the monthly chart. Everyone expects parity to occur any day. The ECB QE has everyone lathered up and ready for a continued plunge and this may be the case but the current projection would be sideways from here. Parity, if it occurs may come in summer or fall but currently the jury is out as to if it occurs. We will have to wait a month or so to revisit the charts.

The ECB may have difficulty going forward due to inavailability of bonds to buy throwing a wrench in the works for President Draghi's plan. In addition, the obscene global central banker Keynesian intervention is six years along and at some point all will realize the emperor is not wearing any clothes. The charts tell you that if long the dollar take your money and move on. if short the euro take your money and move on. The sideways choppiness expected going forward does not make the dollar or euro an attractive trade. What you can do if you are in these trades that are trending in your favor is set a mental stop in your head and stick to it. if the dollar retreats to that level, or euro bounces to that level, exit the trades and avoid reentering until the chart get further along say into April. 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.