USD US Dollar Index Weekly Chart; Dixie Awaits Pope Powell's Testimony

Keystone called the bottom in the dollar as the new year began when every analyst, every one of them, guaranteed a weaker dollar ahead. USD ran higher for five weeks and more off that bottom to print a 91 handle. The call was not rocket science. The falling green wedge is a beautifully bullish pattern. The green lines show universal positive divergence across all indicators and the RSI and stoch's are also coming off oversold levels. All this is bullish. Price violated the  lower standard deviation band so the middle band at 91.24 was on the table and look at that tall shadow from the candlestick 3 week ago. Price tries to touch that 20-wk MA but just misses.

The near-tap of the 20 was enough for those dollar bears to double and triple down on the dollar shorts. Smart and pretty Angie, a novice on the trading floor, says she is quadrupling down on the dollar shorts and Wall Street agrees there is no easier trade to make in the history of the FX market than short the dollar.

The boat is starting to wobble because everyone is on the starboard side gathering up baseball bats and brass knuckles preparing to take the dollar down. The dollar bear party is in full swing. Keystone is the only one on the port side of the boat sitting in a rickety lawn chair. The dollar bears took all the nice deck chairs. Flat soda and stale crackers are Keystone's refreshments while all the dollar shorts are singing songs, drinking Fed wine and partying all night long. Everyone is convinced that the dollar will begin falling in earnest from here. Well, maybe someone will join Keystone's party soon.

After the multi-week pop, you see price printing matching highs and flattening off losing momentum; the red bar. If you draw a vertical line down from the last candlestick that made the last matching high, you see that all the indicators remain long and strong except for the RSI that threw off that little bit of neggie d. That creates the sogginess in price that takes the chart into the Pope Powell show in a few hours. Jerome picked up his dove suit and wings at the cleaners so he plans to fly around the Senate chamber to begin the show dropping $100 dollar bills to the adoring crowd below.

Here is a link to the recent article Keystone published explaining the current reflation, inflation and deflation drama.

Fed Chairman Powell provides Congressional testimony today and tomorrow. He speaks before the Senate Banking Committee this morning and the House Financial Services Committee on hump day. Today is important since he will regurgitate the same on Wednesday. Obviously, Pope Powell controls the markets with his decrees and the dollar will move on his words. The jury remains out if Powell will send the dollar down to 89-ish today, or not, perhaps he reignites the rally.

Keystone's 80/20 Rule says 2's lead to 8's so that breach of 92 in December opens the door to 88. The chart, however, is content with the low in the dollar to begin the year. There is no reason chart-wise for the dollar to come back down to those lows. The chart carries more clout than the 80/20 rule.

If the dollar retreats below that thin blue line, a lower low in price, check the indicators. As long as they are not below the blue lines, the chart would remain in possie d and take off like a rocket higher on a weekly basis.

Keystone expects the broad market to sell off. A March 2020 redux would be the dollar spiking wildly higher as the dollar shorts panic (look at the chart for last March). This causes stocks to collapse, gold collapses, and the big commodity rally would take a multi-week breather.

Markets are likely waiting to see what words of wisdom Pope Powell has to offer. The entire Free World's economy rests on Jerome's thin shoulders. The expectation is for the dollar to continue rallying on the weekly basis moving above the 20-wk MA. The dollar monthly chart looks like a lot of sideways so perhaps USD, or DXY, the dixie, would move through 89-94 for the remainder of the year. If the dollar shorts panic, the move higher may be epic, you could see the dollar perhaps spiking to 97-98 in a heartbeat as the blood is flowing on Wall Street. 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 Friday Morning, 2/26/21, at 6:01 AM EST: USD 90.58 and rising.