Let’s start with the chart of my last post (episode 5) :
I was pointing out on this chart that we were approaching a very strong resistance area. If this analogy was to work, the $USDX had to stabilize and regain some strength.This chart has been made the 27th of March. Today, it looks like that :
We had had a strong rally followed by a significant pullback. I didn’t write any post when we rallied because I had some other indicators that did not validate the rally. So, we’re back here, on the resistance.
Things look easy from here, we break it or we rally hard. I’m in for the rally. I don’t see the greenback loosing grip right now. It wouldn’t make sense when the Fed lost a bit of its dovish tone…in fact, this analogy -considering the magnitude of the correction- would suggest that we’re going to rally hard.I suggest that you read the 4th episode of this analogy where I detailed on a bigger time frame the descending wedge in place for the $USDX since 1985. If the $USDX fail at those levels….it would be an epic fail.
Time will tell, but it will be quick from now.
4 Responses to FXCM dollar index analogy 6
:fxcm print : USDOLLAR) off by 0.57% on the session, marking the fourth largest single day decline this year. The losses come on the back of a substantial rally in risk assets that saw stocks rally for a second consecutive session as remarks made by Fed members Yellen and Dudley fueled speculation for further central bank easing. Weaker-than-expected weekly jobless claims data further reinforced softness in the labor market after Friday’s disappointing NFP print re-ignited the QE debate. Compounding the bullish sentiment were ongoing rumors regarding tonight’s China GDP print with whispers of a read as strong as 9% easing concerns over a slowdown in the world’s second largest economy.
Hi Pitbull, first thanks for your comment. Second, I don’t understand if you agree with my analysis ,give me an example of what a media thinks, and therefore what to fade or if you think what you wrote/copied. Let’s assume you think those words are right.
“USDOLLAR) off by 0.57% on the session, marking the fourth largest single day decline this year.” Yes, up&down, it’s the law of the financial markets. This year hasn’t been especially volatile anyway. Check some candle on the chart I did, and you’ll understand why it doesn’t worry me.
“The losses come on the back of a substantial rally in risk assets that saw stocks rally for a second consecutive session as remarks made by Fed members Yellen and Dudley fueled speculation for further central bank easing.” This is wrong. In fact, the term “further” is ambiguous, I read those speeches and they were more centered on the fact that they will keep the current easing going on, they didn’t say nothing about QE3. They were talking about the stocks of MBS of the FED and on the 0% interest policy going forward to 2014. They were talking about the state of the current easing policy , they didn’t say that they would do more or less in a near future. The NFP were bad,the weekly jobless claims were almost in line with expectations, no way to compare this with the economic paradigm of QE1&2 and Operation TWIST . So, to “re-ignited the QE debate”, it’s peanuts …and you have to recognize the fact that to “”re-ignited the QE debate” it supposes that this debate was over. 2 numbers are enough to”re-ignited the QE debate”??
“Compounding the bullish sentiment were ongoing rumors regarding tonight’s China GDP print with whispers of a read as strong as 9% easing concerns over a slowdown in the world’s second largest economy.” Yeah, whispers…I’m writing this reply just after the number has been released so, it’s easy for me. I don’t trust rumors . China is slowing and the situation is much more complicated than that, the story with Bo Xilai is extremely important.
This post is about technicals, for watching this analogy evolving, but fundamentals are on the side of USD bulls imo: no QE3 the 25th of April, Elections in France&Greece in less than 4 weeks (it will be agame changer), China will not save the world Economy, Japan will eventually default and the UK will ease further before the US. Maybe the dollar will go down, but I expect this analogy to be completed before .
Am I imagining a head and shoulders pattern in the DXY, or is that formation invalid?
Bonjour les fourmis sont nos amis aussi ! I don’t know, you’re talking about an inverted Head&Shoulders on the right side of the chart with the head as the green square?