USD US Dollar Daily Chart; Falling Wedge; Positive Divergence; Tight Bands Ready to Squeeze-Out Big Move

Here is another look at the US dollar daily chart. USD, or DXY, the dixie, is at 93.13. A few days ago, the dollar daily chart was set up with possie d and a bounce was forecasted, despite everyone saying down was the direction ahead, and the bounce occurs due to the positive divergence. The RSI and stochastics are coming off oversold levels which is bullish. The falling wedge pattern is bullish.

As price makes matching and higher highs the last three days, the MACD line and stochastics are long and strong wanting another high in the daily time frame but the RSI is negatively diverging wanting price to relax which it did yesterday. Of course, the dollar, like bonds, stocks and all other trades around the world, are waiting to here the wisdom of Pope Powell on Thursday from the virtual Jackson Hole Symposium. Markets are on idle until Powell brings the tablets down from on high and tells global traders how to trade tomorrow.

As posted a few days ago, the dollar is poised to recover not only on the daily basis but also on the weekly chart. The only thing that can sink the dollar is Powell. Markets are generally expecting lots of dovish talk about inflation averaging, and overshooting the +2% inflation goal, and more easy money accomodation and so forth, which would send the dollar lower. So expectations are high that Powell will make a grand appearance on the computer tomorrow shown flying along the halls of the Eccles Building on the back of a large white dove tossing dollars into the air that were just printed in the basement. If Powell falls short of these dovish expectations in any way, that may be the catalyst that launches the dollar skyward.

Everybody and his brother are short the dollar. The Uber driver and shoeshine boy both said they took entire paychecks and shorted the dollar since it is the easiest trade available. Massive shorts are in the dollar with everyone on Wall Street proclaiming that the US dollar will only travel lower. You know what usually happens when the boat is fully loaded to one side.

On the left side of the chart, you see the Feb-Mar stock market crash. Stocks were collapsing in late February and early March as the dollar fell. As the coronavirus (COVID-19) pandemic news intensified, the dollar catapulted higher which sent equities down the rabbit hole creating the fastest market crash in history. The green line shows where Prince of Darkness Powell rode in on his pale green horse and promised to print money forever. The dollar tanks and that created the recovery rally in stocks from late March to present. The lower dollar pumps commodities, gold, silver, oil and metals higher and their associated industries, which pumps the broad stock market higher.

Note that as the dollar made the last low, lower than early August, the ADX line moves lower. The ADX is way up at 46 continuing to indicate that the trend lower in the dollar is a strong trend (pink box), however, as the dollar made new lows, the strong trend lower is diminishing.

The Aroon red line is pegged in the overbot zone and the green line down at zero both will move in a bullish direction for the dollar going forward. If Powell was not on tap, the expectation would be for the dollar to keep moving higher on the daily and weekly basis and when the shorts begin to panic, the move higher may be like a rocket ship a la March that crashed the stock market, gold and silver.

Charts can only build in information up to the minute. If news occurs, the charts have to absorb that news. This is the story for the dollar. Powell determines its fate but what is interesting it is a pay me now or pay me later deal. If Powell succeeds in tanking the dollar, which will help US manufacturers and exporters, it will likely only be a few days or week or so slump. The charts will readjust and set up with possie d again so the dollar would be expected to then bottom say a week or two out rather than continuing its move higher now.

The lower band was violated so the middle band at 93.17 was on tap which occurred. The upper band at 93.84 is in play. Since Pope Powell is on tap, the lower band at 92.51 is also in play. The dollar is going to make a huge move out of that tight band squeeze (purple arrows). Tight bands tell you a big move is coming but does not predict direction. The prior two band squeezes were down. Will this third squeeze be down too, or, is it time for a big up thrust to occur?

Considering the bubble territory of the stock market, as well as all other asset classes, ongoing rampant complacency, over-valuations, and now the rising dollar, a serious stock market pullback, or crash, is likely at the doorstep. It may happen right now due to a Powell misstep, or, even if the Fed chairman succeeds in pushing the dollar lower to keep the wolf at the door, the dollar daily and weekly charts will likely reset with positive divergence in the subsequent days and the dollar would likely bounce from those lower levels and begin moving higher again. The dollar is ready for a multi-week rally higher despite 99.9% of Wall Street saying the dollar is going to keep trailing lower for the remainder of the year.

The most likely scenario is the dollar jumping strongly higher especially as shorts panic, and stocks and gold tanking. A -10% correction in stocks now through September is easily doable if not more. Right now, it is a question as to whether the stock market collapse begins with a Powell mistake, or, if he succeeds in trashing the dollar for a few more days which will only lead to the pullback in stocks, and rise in the dollar, beginning a week or so out. 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 3:25 AM EST: USD 93.17. Euro 1.1809. US stock futures flat. VIX 22.12. The SPX begins the day at the all-time closing high at the 3443 palindrome. The S&P 500 is at an all-time record high printing at 3444.21 yesterday; the highest number in US stock market history.

Note Added 5:16 AM EST: USD 93.13. Euro 1.1808.

Note Added 5:25 AM EST: USD 93.17. Euro 1.1802. Euro is about to lose the 1.18 level but it is jammed higher. The dollar must remain low to protect America's wealthy class.

Note Added 5:50 AM EST: USD 93.07. Euro 1.1816.

Note Added 6:20 AM EST: USD 93.06. Euro 1.1819.