USD US Dollar Index Weekly Chart; Positive Divergence and Falling Wedge Pattern Setting-Up; Key Support Levels Tested

The neggie d spankdown of the US dollar continues but the move lower is starting to run out of gas on the weekly basis. The red lines show the top in the dollar that Keystone called due to the negative divergence (price moves higher but ALL the chart indicators are sloping lower). Down she goes and the dollar remains sick. That's great, but stock trading is all about 'what have you done for me lately'.

The W pattern bottom in 2021 was a powerful force and the dollar was a moonshot. Price tagged the upper standard deviation band wand and was overextended above the moving averages needing a mean reversion lower. USD drops towards the bottom standard deviation band at 102.91 but has not yet kissed it. The buck has come along way down to see the lower band, and is in the neighborhood, so it deserves a kiss.

The three purple S/R price lines are at 104.8, 103.1 and 101.3. The middle purple support and the bottom band form a confluence at 103 on the dot which may serve as a magnet over the next week or two.

The 50-wk MA is also in the mix at 104.00 so you can gauge the strength and weakness of the dollar by watching the interplay of price against the key levels 104.8, 104.0, 102.9-103.1, and 101.3.

If the greenback slips below 102, it is likely destined for 97-98 according to Keystone's 80/20 Rule where 8's seek 2's on the way up and 2's seek 8's on the way down. 103.20 would hint that 102.80 is coming. If 102 comes it hints that 98 and lower is on the table. From current prices, if 104.22 occurs, 104.18 is likely. If 104.20 occurs, 103.80 is likely.

Drastically lower numbers are not expected at this juncture since the weekly chart is in the process of bottoming. The RSI has plenty of room to drop further and it is sitting their undecided on what to do. The histogram and stochastics are in the bull camp ready for a multi-week rally for the dollar but the MACD line and ROC want lower lows on the weekly basis. Thus, the dollar may bounce for a day or few, but then roll back lower to explore the lower numbers listed above, at that time perhaps all indicators are possie d except for the MACD so that may be another week of buoyancy and then down again, then finally the bottom.

This math places the bottom in the dollar at 2 to 5 weeks out and the holidays are in the mix. You do not have to guess. Simply watch the chart and the bottom is in on the weekly basis when all the indicators are positively diverged. It's not rocket science, and Keystone knows rocket science.

The green falling wedge pattern is bullish setting-up the recovery bounce which, as stated is likely starting in a couple weeks or so call it early January. Since price is in the bottoming process on the weekly chart, do not expect big drops lower (unless news occurs out of left field or from the Fed). The further moves lower for the dollar should be more subtle and the guess would be for price to oscillate at 102-103 into January when the rally on the weekly basis will begin.

The Aroon negative cross occurs showing that the dollar bears are in firm control. The pink boxes for the ADX prove that the move lower in the buck in 2020 and early 2021 was a strong trend lower and the move higher in the dollar in 2022 was a strong trend higher.

You can see the ADX starting to go sub 30 which would nix the strong multi-month rally move going forward. The jury is out if the downtrend will be a strong move lower. For that to occur, the ADX needs to curl higher now and start printing 35 and 40 which would indicate the weakness in the dollar has legs. For now, the trend lower is not a strong trend lower which reinforces the analysis above that the buck is bottoming now on the weekly basis and headed for the start of a multi-week rally.

Keystone is not holding any positions in the dollar long or short right now. If you bring up the gold weekly chart, you can see the opposite of the dollar chart, which would be expected since they move inversely. On gold, at 1800, if the rally continues higher for a couple weeks or few (same time duration of the dollar but the dollar is bottoming and gold is topping), likely targets 1850 in early January where it will top out, but again, no need to guess, simply watch the gold weekly chart and wait for all the chart indicators to go neggie d and you can call the top.

USD, the US dollar, the dixie (DXY), the buck, the greenback, is trading at 104.60 in real-time as this mumbo-jumbo is posted. Gold is at 1802. Keystone is not trading gold long or short right now. 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 Wednesday Morning, 12/21/22, at 9:45 AM EST: USD 104.22. Euro 1.0604. Gold 1827.