USD US Dollar Weekly and Monthly Charts; Weekly Basis is Topped-Out but Monthly Basis Wants Another High

Keystone posted the US dollar chart in late June calling for a top, which occurred, but if you blinked you missed it. As soon as the dollar started its retreat, rampant worry escalated over a recession in Europe. Natty gas prices are going through the roof due to the Ukraine War. The euro and sterling collapse and the dollar jumped up out of its slump pumped with new adrenaline. The blue lines show that period with the top in the dollar due to the negative divergence, and the greenback drops for a week, but the European recession drama changes the game, and the buck rocket-launches higher.

The dollar sky rockets as the euro collapses with the euro/dollar currency pair dropping to parity (1.00). USD pokes up through the upper standard deviation band on the launch that makes price way overextended above the moving average lines requiring a mean reversion, and it occurs. The neggie d (red lines) creates the spankdown. Note, however, that the MACD started sloping higher again (green) and is not negatively diverged from price, thus, the MACD wants to see one more price high after weakness occurs for a few weeks due to the neggie d with all other indicators.

The sogginess in the dollar occurs during July and price should return to the 20-week MA, the middle band, at 105 now, but it does not, so that is unfinished business. The dollar begins to rally again shooting higher to match the prior high like Johnny B Goode a ringin' a bell. Since price is at a matching or higher high you can look at the chart indicators to see if there is neggie d (maroon lines). And there is universal neggie d across all indicators so the dollar is at another top.

The dollar is also near tagging the upper standard deviation band at 109.31 so it may want to do that before the retreat on the weekly basis occurs. The RSI and stoch's are coming off overbot levels another negative. The Aroon bullish green line is in euphoric heaven as bullish as possible while the bearish red line is in the basement with the bears convinced that the dollar will never come down again. Both are contrarian indicators which say dollar is at a top in the weekly time frame.

The ADX is in the stratosphere at 50 overall showing a strong trend higher for the dollar as it rallied from March to present. However, look at the last few months. The dollar comes up for another price high but the ADX slips a touch. In other words, the trend higher in the dollar was stronger as it topped in July than as it tops now; this is another bearish signal for the weekly time frame.

Thus, the green back should fall on its back going forward for a few weeks targeting the maroon circle area where the prior congestion was at and where price can tag the middle band.

Remember, trading is all about playing 5-dimensional chess with the minute, hourly, daily, weekly and monthly charts playing the time frames against,  and with, each other.

The SPX monthly chart shows the multi-month rocket launch in the dollar. A stronger dollar hurts the multi-national US companies overseas. The green lines show a two-leg bull flag pattern, or you can call it a two-leg bull pennant, or you can also call it a diamond pattern (blue). The initial leg is 80 to 103 (late 2016 high), a difference of 23. The dollar consolidates sideways with a slightly lower bias, textbook behavior, and then begins the second leg from 90. Thus, 90 + 23 = 113 for the two-leg bull flag upside target.

The dollar is at 109 and Keystone's 80/20 Rule says 8's lead to 2's so 108 was breached opening the door to 112 which provides more street cred to the 112-113 target on the monthly chart. The indicators are generally long and strong wanting to see another high in the dollar, on the monthly basis, after a month or so (multi-week downside) of weakness that may occur, but the RSI and stochastics are overbot wanting to see some downside action so this will conspire with the weekly chart to send the dollar lower on the weekly basis. The monthly chart is not done with the upside, however, although you can see neggie d in the RSI over the last 7 years.

The dollar has more highs ahead on the monthly basis but not as much as people may be expecting and most of these folks surely do not expect the multi-week decline that will begin for the dollar any day ahead perhaps when Fed Chairman Powell opens his mouth on Friday morning from Jackson Hole?

Marrying the weekly and monthly analyses together, and sprinkling some magic dust on top, the dollar is topping right now and will begin a multi-week slide lower. You will have to wait for possie d to form to call the bottom probably in September some time. Then the dollar will begin a big up move again to the 112-113 area where it will top-out on a long-term basis probably in October-November.

Interestingly, if you call the first leg up on the monthly a pure move from 80 to 99 rather than the 103, that is a difference of 19, thus, adding 19 to 90 is a goal of 109 for the second leg where price is at now satisfying the flag pattern. This behavior simply hints that the dollar is ripe for the top on the weekly basis. The monthly chart indicators remain long and strong so the dollar wants to come back up again after the multi-week downside occurs. It will likely set up a triple-top on the weekly chart a month or two out.

Keystone does not have any currency trades on currently but the expected direction would be down for the dollar for several weeks, then a bottom in September, then a rally back the current highs in October. 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 at 7:37 AM EST: The US dollar, dixie, is trading at 109.02. Euro/dollar 0.9923 now below 1.00 parity. The euro/dollar pair teased below parity a month ago but recovered but this time it means business. The EURUSD daily and weekly charts are in positive divergence which jives with the above analysis. The dollar will move lower for the coming weeks and the euro/dollar currency pair should rally higher. Jackson Hole may serve as the inflection point.

Note Added at 10:34 AM EST: The US dollar collapses -0.7% to 108.31 after weak PMI data. Is Keystone's analysis correct above and the multi-week downturn begins or is he a blind squirrel that just found a nut for one day? The next month will tell the tale. Euro/dollar 0.9982 below 1.00 parity. 

Note Added at 11:35 AM EST: USD 108.20. Euro/dollar 0.9986. Dollar down and euro/dollar pair up.

Note Added Thursday Morning, 8/25/22, at 8:50 AM EST: USD 108.56. Euro/dollar 0.9964. 

Note Added Friday Morning, 8/26/22, at 8:00 AM EST: USD 108.36. Euro/dollar 1.0005. Federal Reserve Chairman Powell speaks from Jackson Hole, Wyoming, USA, in 2 hours.

Note Added Friday Morning, 8/26/22, at 9:20 AM EST: USD 107.94 a 107-handle. Euro/dollar 1.0037. Federal Reserve Chairman Powell speaks from Jackson Hole, Wyoming, USA, in 40 minutes.

Note Added Friday Morning, 8/26/22, at 9:40 AM EST: USD 107.82. Euro/dollar 1.0063. Federal Reserve Chairman Powell speaks from Jackson Hole, Wyoming, USA, in 20 minutes. Whoopsies daisies. Check that. Dixie is at 107.74.

Note Added Saturday Morning, 8/27/22, at 6:10 AM EST: After the Powell drama, USD is at 108.84 and euro/dollar 0.9961. The US stock market mini-crashes with the Dow down over 1,000 points and the SPX pukes -3.7%.

Note Added Monday Morning, 9/12/22, at 8:00 AM EST: USD 108.07. Euro 1.0154. US 10-year yield 3.27%.

Note Added Tuesday Morning, 9/13/22, at 6:50 AM EST: USD 107.80. Euro 1.0174. US 10-year yield 3.32%. Inflation data hits in 1-1/2  hours.

Note Added Tuesday Morning, 9/13/22, at 8:39 AM EST: USD jumps higher to 109.01. Euro 1.0054. US 10-year yield 3.42%. Inflation data is hotter than expected. S&P futures were positive but collapse on the data down -1.8%.

Note Added Friday Morning, 9/16/22, at 6:00 AM EST: USD moves higher to 110.00. Fear runs rampant that the globe is going into a major slowdown. Bellwether FedEx reports of bad times ahead tanking markets driving the US dollar index higher. Interestingly, however, USD is not shooting up all that much at least not yet. USD sputters between 109 and 110 since the Tuesday pop on the inflation data.