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Great Graphic: Nearly Five-Month Uptrend in the Dollar Index Set to be Tested

Summary:
The US Dollar Index has been trending higher since early May.  This Great Graphic, created on Bloomberg shows, that it has been successfully tested several times. It appears set to be re-tested in the coming days.  It comes in near 94.80 today and rises a little more than two ticks a day to finish the week near 94.90. Technical indicators, like the RSI, MACDs, and Slow Stochastics suggest there is reasonably good chances that the trend is violated. We see two main scenarios.  The more benign of the two is that the violation is a function of a broad sideways movement.  In this case, the immediate target is 94.45 the low from September 8 upside reversal.  Below there, is the congestion from the second half of August in the 94.05-94.25 area. The other scenario warns of deeper losses.  It notes that the pullback in the second half of August already completed the 61.8% of the run-up from the early May low (~91.90) to the late-July high (~97.57). Under this scenario, the Dollar Index gains since mid-August was a correction of the down leg from late-July.  The late-August high and last week’s high stalled near 96.25, a corrective retracement target.  The risk is a return to the 92.00-93.00 lows from Q2. US Dollar Index(see more posts on Dollar Index, )Click to enlarge.

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The US Dollar Index has been trending higher since early May.  This Great Graphic, created on Bloomberg shows, that it has been successfully tested several times.

It appears set to be re-tested in the coming days.  It comes in near 94.80 today and rises a little more than two ticks a day to finish the week near 94.90.

Technical indicators, like the RSI, MACDs, and Slow Stochastics suggest there is reasonably good chances that the trend is violated.

We see two main scenarios.  The more benign of the two is that the violation is a function of a broad sideways movement.  In this case, the immediate target is 94.45 the low from September 8 upside reversal.  Below there, is the congestion from the second half of August in the 94.05-94.25 area.

The other scenario warns of deeper losses.  It notes that the pullback in the second half of August already completed the 61.8% of the run-up from the early May low (~91.90) to the late-July high (~97.57). Under this scenario, the Dollar Index gains since mid-August was a correction of the down leg from late-July.  The late-August high and last week’s high stalled near 96.25, a corrective retracement target.  The risk is a return to the 92.00-93.00 lows from Q2.

US Dollar Index

(see more posts on Dollar Index, )
US Dollar Index, September 26, 2016

Click to enlarge.

Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

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