USD US Dollar Index Weekly Chart; Overbot; Negative Divergence Developing; Upper Band Violation

Keystone has posted the US dollar chart a couple of times over the last few weeks looking for the top but each time she wants to come in the door is slammed by inflation worries, Fed hikes, strong jobs reports and Europe and the UK descending into recession. The dark blue lines show the top in the dollar in June with all the indicators neggie d. Down she goes but if you binked you missed it because the Fed was jawboning higher rates.

The news is Outtasite these days, as Wilco sings, crazy and wild, like skydiving. Stronger than expected jobs reports, higher inflation, the Fed members pounding the table for higher rates day after day, and most importantly fears of recession across the pond, send the dollar higher, nullifying the technicals, so the chart has to set up again for the new news. The euro and sterling currencies tank on recession fears. The euro and US dollar currency baskets hold a substantive portion of their holdings in each other's currencies so when the euro collapses the dollar goes to the moon sending commodities and oil lower.

So the dollar shoots higher on the various news bites, emotionally-driven, and another top is in play in July ushering in a multi-week pullback but again, the downside ends due to euro weakness and the dollar screaming higher. The chart sets up again and the last 3 weeks are matching price highs (red bar) so the indicators can be assessed for neggie d. All the indicators are negatively diverged (red lines) except for the MACD (green line).

Thus, the dollar wants to print another matching high after a pullback. A touch of 113 to start the week may place the top. A couple of scenarios are in play and all you have to do is watch for the neggie d, on the MACD, to know the top is in, you see? A new candlestick will begin on Monday and if the dollar is in this 112.70-113.00 range and the MACD slopes down (neggie d), the top is in and the dollar begins a multi-week slide lower.

The other outcome is a jog move to provide time for the MACD to go neggie d. Price may migrate up towards or above 113, that's fine, another matching high, and then receive the smackdown due to the negative divergence on the other indicators (red lines). This behavior can continue for several days or a week or so. Then price will  reverse and come back up the following week to print in that 113 area again, and when this occurs, the MACD will likely be neggie d joining the other indicators, and the top will be in for the buck on the weekly basis.

Thus, the dollar is either topped out now, and you will know Monday or Tuesday depending on if the MACD goes neggie d, or, the MACD continues sloping higher which means a jog move is in order. The buck will fall for a few days or so but come back up to satisfy the long and strong MACD, but when price makes the matching high in the 113 neighborhood or higher, the top will be in (a week or two out). Simply watch the MACD and it will tell you the answer in a couple days.

The greenback has violated the upper band so the middle band, which is also the 20-wk MA, at 107, is on the table, as well as the lower band at 101, both rising.

A drop in the dollar on the weekly basis would correspond to a rally in the US stock market for a few weeks since commodities will be jumping higher. The prior TNX charts indicate a drop in yields is at hand so the recent behavior of stocks and bonds moving in tandem remains in play.

Any day forward, a pivot is likely where the dollar will begin dropping, stocks begin rallying and note and bond yields fall. Trades and investors will be buying both stocks and bonds going into Halloween. When the recession hits in full force in the weeks and months ahead, and layoffs are increasing, that is when stocks will begin a new leg lower but Treasuries will be perceived as safety with note and bond prices higher and yields lower, but this is a discussion probably for the end of year and start of 2023.

Keystone is not playing the dollar right now but the positioning would be for the dollar to drop on a multi-week basis going forward and conversely, the euro, $XEU, to rally. The wildcards are the Fed that will not relent on its hawkishness and the fate of Europe and the UK vis-a-vis the euro and sterling, respectively. Keystone always wanted to use vis-a-vis in a sentence. 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 Monday Morning, 10/10/22, at 10:23 AM EST: USD 113.15. Euro 0.9697.

Note Added Tuesday Morning, 10/18/22, at 9:35 AM EST: USD 111.87.

Note Added Friday Morning, 10/21/22, at 7:25 AM EST: USD 113.44.

Note Added Tuesday Morning, 10/25/22, at 10:40 AM EST: USD 111.03.

Note Added Wednesday Morning, 10/26/22, at 8:14 AM EST: USD 110.27 with a LOD thus far at 109.94. Analysts, traders and talking heads exclaim that they do not know what is causing the pullback in the dollar. Hey dummies, it's neggie d. That's all it is, the neggie d is kicking-in.

Note Added Thursday Morning, 11/10/22, at 10:30 AM EST: USD 108.46.

Note Added 11/14/22: USD 106.16.

Note Added 11/15/22: USD 105.53.