Why the US Dollar is About to Go Up, and the Euro Isn’t.

Fibozachi's picture

After 8-months of persistent decline (-11.75%), the US Dollar ($DXY) appears poised for a strong technical bounce across daily, weekly and monthly timeframes.

With $DXY’s 92.63 monthly close, August 2017’s end likely marked an 8-month high-to-low cycle for the US Dollar – which hovers a mere penny above major support at 92.62 (next major support ~ 91.92).

 

92.63

That’s where the Dollar ($DXY) closed the month of August.

A full 0.01 above major support at 92.62.

 

The Dollar’s been hammered for 8-months straight.

It’s gone down for all of 2017.

Yeah, it bounced in February - c’mon.

 

After an 8-month high-to-low time cycle that shaved off 11.75% (peak-to-trough), the US Dollar appears poised to find its footing and bounce markedly from a cluster of strong price support spanning 92.62 - 91.92 (note $DXY price action and weekly candlesticks across the last few weekly bars of 2014 and first few of 2015 ~ extremely strong support range from massive technical breakout).

 

Technical Outlook for the US Dollar ($DXY)

~ why it wants higher from here

 

The combination of a strong 8-month selloff – that ends in a picture-perfect doji, 1 penny above the first major support level going back to 2015 – suggests that a strong bounce is more than likely to develop over the next few months, with 95/96 $DXY the likely target (round number 100 is a longer-term possibility and a floor to absolutely trampoline through 103 if  Big Lil’ Kim launches an EMP that ‘fails’ over Hokkaido/ Sakhalin.

The daily chart below shows the US Dollar with the Super RSI, Super Stochastics, Super MACD, and Super DMI – it’s worth noting that all four of these technical indicators are showing a clear-cut bullish divergence. This is because every indicator is registering a higher value even though the price of $DXY printed a new swing low.

 

dxy super rsi macd dmi stochastics

 

dxy weekly super rsi macd

 

dxy monthly super rsi macd dmi

 

dxy monthly candlestick patterns

 

The following chart shows the exact Pip Strength of individual currencies … 

(EUR, GBP, USD, JPY, CHF, CAD, AUD, NZD)

over the last 8-months ~ the timespan when the USD registered it’s last major swing high.

Over this period of time, the USD has been the weakest currency when we tally the total amount of pips lost since January 1st. 

 

Working from the assumption (albeit measured) that the USD is about to turn up …

what may prove itself the best currency pair trade, from the perspective of technical risk:reward?

 

EUR has been the strongest performing major currency (represented via Cyan below) but appears ready to cool-off, lose its lust for the luster of 1.20 and turn south (after explicitly failing to plot a new swing high).

 

fibozachi forex force pip strength

 

i) Looking at a EURUSD monthly chart shows that the open gap from January 2015 has just been filled (to within roughly 20 pips), and

ii) While the 1.2100 level has provided rock-solid support on numerous occasions, we’re now on the other side of it ..

iii) Meaning that same level will likely serve as resistance now – because price is approaching it from below instead of above.

 

eurusd monthly support resistance level

[1] http://www.zerohedge.com/news/2014-07-29/most-significant-danger-according-elliotts-paul-singer

[2] http://www.zerohedge.com/news/2017-08-04/epic-quarterly-letter-elliotts-paul-singer-rages-against-everything-passive-investin

  

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Quinvarius's picture

No it isn't  The USD is going to keep going down for exactly teh same reasons I knew it was going to start going down.  Trump announced he would be lowering teh value of teh USD.  That is all you need to know.  FOREX rates are set by the Treasury and Central banks.  The USD is going to continue to drop.  If you think FOREX is a free market, you are a retard.

konadog's picture

Could be correct from a short-term trading perspective.

From a longer-term investor's perspective, de-dollarization is well underway. Americans are fed-up watching the Fed debase the currency to feed the military industrial complex and the rest of the world is even more sick of it because it hurts them even more than Americans. Fiat currency is nothing more than debt with 0 days to maturity. Raise your hand if you think the US can repay its $20T (and exponentially growing) debt (as a reminder, that's about $150,000 per US household with median household net worth of about $80,000, most of which is debt bubble inflated home equity).  That's what I thought. That means the dollar is going down - way down - in coming decades.  The tipping point for the mother of all currency collapses will be when it's evident to everyone that the US Gov will be issuing more debt just to pay interest on existing debt. Confidence will be lost and Katy bar the door. To me - it's a mathematical certainty, but others are still holding out for a miracle and trying to make trading gains before throwing in the towel under the false believe they will be smart enough to get out first. There have been past miracles that saved America's ass like the discovery of gold in California in 1848 or maybe there will be some sort of debt jubilee, but I sure wouldn't bet my fortune on it happening again.

NobodyNowhere's picture

If TA worked Rothschilds would have been reduced to being my butler.

any_mouse's picture

And prices in USD will go down. Like for equities, coins, commodities.

mosfet's picture

And what happens to all this T/A if the Fed decides to fold on their balance sheet sell-off rethoric?  My guess is it goes out the window and USD idx heads for 80's.

Sept 20:

  • Fed folds - Dollar much lower / Gold much higher / Market much higher.
  • Fed proceeds with balance sheet sell-off - Dollar higher / Gold lower / Market lower - but correction imminent, so Gold eventually much higher.
  • Before then I'll continue adding to my Gold/Silver minig stocks on any significant 2-day sell-offs.
umdesch4's picture

Sorry folks. This has all been my fault. I bought a bunch of Proshares EUO earlier this year. But it's ok. I'll wait.

Haitian Snackout's picture

Last flush before the ramp. Euro doesn't buy shit in home countries. Should be $.75

ArgentoFisico's picture

I think it's the exact contrary, a dollar doesn't buy shit. A euro buys more than a dollar.

Anyway i think dollar will go up nonetheless.