Thursday, June 03, 2010

Why I'm Watching The U.S. Dollar



Above is a daily chart of the U.S Dollar and in the lower panel is the ADX indicator.  As you can see the ADX is over 40 which means the greenback is in a very strong uptrend. You'll also notice the ascending triangle formation that is now taking place. The recent highs are all at 87.50 but the recent lows are getting higher and higher which means buyers are becoming more aggressive. This sets up a pattern known as an ascending triangle and that fact that such a formation is taking place in such a strong uptrend might forecast an explosive breakout should the dollar trade above 87.50.

6 comments:

Anonymous said...

Hi Kevin, what are the chances of the USD breaking down from the ascending triangle? What would the downside target be if that were to happen?

Anonymous said...

Hi Kevin,

Thanks for your excellent blog.
Don't you think that bullish USD and consequently weak FXE would negatively affect SPY, which you described as bullish in the previous post?
Are we witnessing decoupling?

Thanks!

Kevin said...

Well, it looks like traders are watching the Euro more than anything else. To answer you4 question, yes a strong dollar can put pressure on stocks.

Anonymous said...

Timely topic,
There is a breakout in dollar and euro.
How do we know it this is real or false breakout?
Jack

Anonymous said...

The more I think about, the more it reminds me the crash of october 08. I'm liquidating all long positions (most were stopped out this AM) and thinking about shorting euro on this breakout. Some people talk about dollar euro parity. I guess it could happen.

Mike Truong said...

OT

Kevin,

PMs led the way again. As I posted several posts back, I thought the divergence between PMs and SPX was telling. Gold rebounded today but silver is still in a hard downtrend. I am looking for silver to bottom out at 16.30-16.40 and hopefully a bullish divergence to go long again.

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