The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies- according to Wikipedia..
This time technical view on dollar index will be presented in a different format. I shall start with top down approach. Starting with first long term time frame - monthly chart, medium time frame- weekly chart & then finally short term time frame - daily dollar index chart.
In the monthly Dollar Index chart it is clearly evident that it is in the downtrend for long term frame. But the real quest, that this down trend will persist or it has bottomed out. In the chart double supporting down trend line is observed, which has been lending consistent support to the dollar index. In fact this double support trend line has been acting as a spring board, for any up move. In fact after a consistent support a positive divergence is seen, after which the dollar index zoomed to a high of 127 and then again fell to take support at the double supporting down trend line. Currently a possibility of an ascending triangle formation is observed. In fact the mega overbought throw back of Roc throws a possibility that in near future, the dollar index down trend may end. But unless dollar index crosses 85-89, it is difficult to defend the argument that dollar index has bottomed out or that long term down trend in dollar index has come to an end. In the weekly time frame chart of dollar index, 3 fan lines are observed. In examining the 3 lines in the fan principle, it is interesting to note how often the number three shows up in the study of technical analysis and an important role no three plays in technical literature. The fan principle uses three fan lines as it is know fact that both major bull market or bear market are made of three phases...
In weekly time frame graph of dollar index, the fan lines are drawn along successive peaks as shown in this chart. On break-out of the third fan line, uptrend signal for long term is signaled.
In daily time frame a down trend line is seen and dollar index has been falling. But dollar index has given a break-out on the up side and has taken support on the down trend line. Down trend line may lend give support to dollar index. The price range is around 75-78.
In daily dollar index chart in October 2010 made two small lower low troughs in price. The first lower trough was at the price of 77 while the next trough was at 75. But interestingly Roc indicator made higher high troughs, thus registering positive divergence.
Now with positive divergence and breakout from daily down trend line of dollar index on the up-side, down trend may come under arrest...but more technical confirmations are still required....
In the monthly Dollar Index chart it is clearly evident that it is in the downtrend for long term frame. But the real quest, that this down trend will persist or it has bottomed out. In the chart double supporting down trend line is observed, which has been lending consistent support to the dollar index. In fact this double support trend line has been acting as a spring board, for any up move. In fact after a consistent support a positive divergence is seen, after which the dollar index zoomed to a high of 127 and then again fell to take support at the double supporting down trend line. Currently a possibility of an ascending triangle formation is observed. In fact the mega overbought throw back of Roc throws a possibility that in near future, the dollar index down trend may end. But unless dollar index crosses 85-89, it is difficult to defend the argument that dollar index has bottomed out or that long term down trend in dollar index has come to an end. In the weekly time frame chart of dollar index, 3 fan lines are observed. In examining the 3 lines in the fan principle, it is interesting to note how often the number three shows up in the study of technical analysis and an important role no three plays in technical literature. The fan principle uses three fan lines as it is know fact that both major bull market or bear market are made of three phases...
In weekly time frame graph of dollar index, the fan lines are drawn along successive peaks as shown in this chart. On break-out of the third fan line, uptrend signal for long term is signaled.
In daily time frame a down trend line is seen and dollar index has been falling. But dollar index has given a break-out on the up side and has taken support on the down trend line. Down trend line may lend give support to dollar index. The price range is around 75-78.
In daily dollar index chart in October 2010 made two small lower low troughs in price. The first lower trough was at the price of 77 while the next trough was at 75. But interestingly Roc indicator made higher high troughs, thus registering positive divergence.
Now with positive divergence and breakout from daily down trend line of dollar index on the up-side, down trend may come under arrest...but more technical confirmations are still required....
No comments:
Post a Comment