The US dollar is running the show over the last month. The euro spent June moving sideways through 1.12-1.13 and then 1.14 as ECB President Lagarde spoke mid-July. The euro took off higher after that ECB meeting to 1.15, then 1.16, 1.17, 1.18 and wheeeee, whoopie, 1.1906. It's a euro orgy so the US dollar is beaten lower (the two currency baskets move inversely to each other; the charts are always mirror images) and gold, silver, commodities and other companies that benefit from a weaker dollar explode sky high sending the broad US stock market higher.
On the daily chart, the dollar collapses into a falling wedge. The RSI and stochastics are oversold agreeable to a bounce. The lower band is violated so the middle band at 93.88, and falling, is on the table and price tags it. The upper band at 95.65 is on the table. The green lines show the universal positive divergence that sends the dollar higher a few days ago. A couple indicators are long and strong and a couple are neutral not all that enthusiastic about moving too much higher.
The weekly chart shows positive divergence with all the indicators except for the weak and bleak MACD line. Thus, the possie d on the weekly conspires with the possie d on the daily to bounce the dollar. However, the weak and bleak MACD line wants to see another low in price in the weekly time frame. When that occurs, in a few days or week or so from now, maybe a couple weeks, the MACD line should go possie d and that will identify the bottom in the dollar on the weekly basis and a multi-week upside rally will begin.
The orange boxes show the behavior in the dollar during the big February-March stock market crash. Stocks began falling apart and dying in late February and collapsed into the third week of March when Fed Chairman Powell rode in on his pale green horse promising easy money for as far as the eye can see. The stock market was saved by easy money as usual which protects America's wealthy class that owns large stock portfolios. Equities rally from late March into the present top.
When the crash first started, the dollar was dropping with stocks, then the dollar reverses hard exploding higher which obliterated the stock market. Gold also dropped like a rock in sync with equities dropping as the dollar popped higher (two long white candlesticks). This fractal may repeat now since the SPX charts in all time frames are negatively diverged across all indicators and the complacency and fearlessness is at multi-year record levels (a significant and substantive stock market top is likely printing right now). Thus, the dollar may take off higher like a rocket sending stocks, gold and silver into Hades. The positive divergence (green lines) is rocket fuel that is being filled into the dollar's gas tanks. The positive divergence prepares the ticker on the launch pad and then, bingo, price shoots wildly higher like a model rocket. Pay attention to the MACD line on the weekly chart since it tells you when the bottom is in for the US dollar and a multi-week rally begins. It should be anytime.
The daily chart shows that tight sideways channel in play over the last couple weeks so dollar bulls win above 94 (Which will send the US stock market lower) while dollar bears win below 92.50-ish (which would rally the US stock market).
The lower band is violated on the weekly so the middle band at 97.57, and falling, is on the table. The 200-week is at 96.27 moving dead-flat across the chart. The middle band, which is also the 20 MA at 97.57, is moving down to perhaps form a confluence with the 200. The dollar may chop for a few more days but then when the MACD on the weekly is possie d, the dollar will pop higher and target the 96-97 area. This activity would tank the stock market.
Everybody and his bro say the dollar weakness will continue. When the dollar reverses higher due to the possie d explained above, the short-covering will be nitro-fuel for price. This is likely the reason the dollar popped drastically higher in March. History will likely rhyme. The UUP ETF is a long play going forward. Its charts mimic the dollar charts. Wait a week or two and when you see price probably testing the 200-week MA support at 24.98, and positive divergence occurs with the MACD line, the bottom is in and UUP should rally higher for a few weeks. A good entry point for UUP may be in the 23.70-25.20 area over the next couple weeks. Keystone does not own UUP long or short currently but will likely give her a whirl in a week or so. UUP may begin popping higher at anytime (with stocks dropping) which hints at a March redux so if nimble and quick enough that may be snaggable for a quickie pop.
As a side note, the US dollar monthly chart leans towards more weakness ahead. Thus, forming a trading mosaic from these time frames, the dollar is set to explode higher at any time. If markets remain calm, the dollar will likely jog at these prices for a few days or week or two, then rally sharply higher and begin a multi-week rally tanking US stocks. After a few weeks, say, in September, the dollar move will be over on the weekly (when neggie d forms) and the buck will likely retreat back down again to retest the lows and likely move lower to the 2019 lows but this would not occur until say, November-December. The charts will simply have to be monitored as time continues and the analysis can be adjusted and eventually pin-pointed. 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 Saturday, 8/15/20: The dixie is at 93.10. The Friday LOD was 93.02 and HOD 93.41.
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