US Dollar Index

Intro

The US Dollar has been moving in a sideway fashion for the best part of 6 years. More recently the trading range has become even narrower and the Dollar index has been fluctuating in a 7% band for the last 18 months.

USD has the characteristic of alternating long consolidations and equally long trending periods. I believe we are on the verge of a new strong uptrend in the currency.

 Conclusion

A monthly close above 85 would trigger a very strong buy signal. First target 90 and if this is broken then we have a confirmed trend that can go up to 105 and 120  in the coming years. The economic/financial implications will be very important.

 

Analysis

The long term chart (chart1) shows an alternation of consolidations and trending periods. The MACD indicator is flirting with the upper boundary of a triangle. A break above the line tends to give excellent warning signal of an incoming break of price above its resistance

 

Chart1

  

 

Zooming in, we can appreciate how the index has found support for the 3^rd time, confirming the validity of the red trendline. This month price action has created an hammer, a reversal pattern.

The rectangle which has offered support and resistance levels has a measured target of just above 90, at the same level where we have the larger consolidation boundaries and the downsloping trendline that has contained the USD moves since early 80’s.

A close above 85 would point for a minimum retest of the 90 level and if that doesn’t stop it then we can move to 105 (larger rectangle measured move)

 

Chart2

  

Moving on the weekly chart we can appreciate how recent price action has created a diamond (chart3, gold rectangle). Deciding when/if diamond patterns have been broken is a tricky thing because of the diagonal boundaries but a break of the macd on the upside should give us a good warning sign that the move has finally started.

 

Chart3