A faint light is often all that is cast upon truly outstanding positioning strategies before they ready. Fundamental analysis, awareness of monetary policy developments, positioning conditions and other trend characteristics followed allow candlestick charting analysis to shine needed illumination. Martin B. McGuire
Tuesday, October 25, 2016
US Dollar Reigns(ed) Supreme
The US Dollar Index (DXY) achieved a new 8 month high on
Friday, October 21st and powered ahead until this morning as economic data and
Federal Reserve official’s rhetoric continues to provide enough support for
December FOMC rate hike.Fourteen new
session highs have accompanied the last 19 sessions as the US Dollar Index has
improved 4% over that period.The US
Dollar Index is clearly stretched.
We have been bullish the US Dollar Index and became more
vocal in mid-September (see; Dollar
Index Still Looks Bullish).While
our longer term view remains somewhat constructive, current developments make
it increasingly difficult to rely on the bullish trend to deliver.Conveniently, a bullish trend line is drawn
in the enclosed chart that collects a number of important chart points and
would show a changed momentum should DXY settle below.This trend line intersects trade today at
98.69 and advances at a rate of roughly .20 per day.
Currently DXY trades to 98.65 and would be below that
aforementioned bullish trend channel support.A settle or end of day below 98.69 would be a show of momentum change
because since late September DXY has settled above this trend line.Today’s price action has developed a bearish ‘shooting
star’ pattern, something often seen at the high of bullish advances before they
reverse.Consider also that the price
action over two session period ending today (considering settlement here or
near) is a ‘bearish engulfing’ and too would portend lower levels.
Finally, we would caution that neither the ‘bearish
shooting star’ nor the ‘bearish engulfing’ patterns have been confirmed and it
would be an aggressive positioning strategy to short the US Dollar Index here
based on those signals.However, this is
certainly a good spot to take profits on long positions gained in bullish
strategies dating from my last note highlighted above.