DXY Update: United States Dollar Macro Technical Analysis
This is an update on the DXY analysis I've been posting about recently. In my last post I highlighted the fact that USD was losing ground on the DXY chart breaking out of its multiyear diamond pattern dating back to 2014. This diamond reversal pattern ultimately has targets of around $80 and the USD is now sitting at around $93-94. Since my last post there was a strong move to the downside and it was a nice confirmation to what was mentioned in the last analysis.
I would like to talk about the new action that I am seeing in the charts.
1. The USD has set a double bottom around 92.55 and in its recent consolidation you can see that there is bullish divergence on the RSI and the MACD seems to be shifting to bullish momentum which are both circled in black on the graph.
2. Also you can see we moved outside the standard deviations on the Bollinger Bands which would suggest a bounce to the mean line at least.
With the 2 points mentioned above, it is likely that we are going to see a recovery in the immediate term. With that being said, the question now is how strong of a recovery are we likely to see? I would like to add my thoughts regarding that question below.
Back in May 2020 the DXY was riding the resistance line of the diamond pattern around $100 flirting with a breakout to the upside. Not only was the DXY looking like it wanted to break up out of the macro diamond pattern, it was also in a micro symmetrical triangle pattern that was forming at the top of the diamond near resistance. This symmetrical triangle pattern broke to the downside and the sell off took us to around $95.75. From the $95.75 low of that first leg down the DXY had a perfect retrace to the 0.618 Fibonacci level before reversing to the downside once again and ultimately breaking out of the diamond pattern to the downside. This is the leg down that we just experienced taking us to $92.55.
I did notice that both the mean line of the Bollinger Bands and the 0.618 Fibonacci retracement level from this most recent leg down are at the same spot on the graph at around the $93.50 level. With everything mentioned above I think this is the most probable target for a retracement. This would also be sufficient enough to reset the RSI with a trailing 14 candle setting. I believe at that point we are ready to continue the move down to our target of $80 and we can do another update at that time when the charts and fundamentals play out more.
EXTRA NOTES REGARDING CRYPTO
I am not going to go in depth too much regarding this next point (if you want me to do a detailed analysis i'm not opposed to doing so if you send me a message) but my investment thesis is to go long bitcoin and other select alt coins to hedge against a weakening dollar so I would just like to make a mention of it:
Alt coin markets have been RED HOT especially defi. I've personally had over 10 trades in the space that made me triple digit percentage returns, unleveraged, with in the last several weeks. Bitcoin has been the least volatile while alt coins have been on a tear. Long story short the majority of them are due for a pullback and the Bitcoin dominance chart is showing bullish divergences. Pair the BTC.D with everything I've mentioned in this post and I think we see alt coins specifically pull back in the immediate term against both the dollar and bitcoin.
Keep in mind that can play out a couple ways. Either Bitcoin continues to consolidate at these levels while alt coins have a minor pullback or bitcoin also starts to pull back to test old resistance as new support (which would still be healthy for the market including alt coins long term) and alt coins get reckt. Either way, I still think its a hodl and buy the dip type of environment.
I would like to talk about the new action that I am seeing in the charts.
1. The USD has set a double bottom around 92.55 and in its recent consolidation you can see that there is bullish divergence on the RSI and the MACD seems to be shifting to bullish momentum which are both circled in black on the graph.
2. Also you can see we moved outside the standard deviations on the Bollinger Bands which would suggest a bounce to the mean line at least.
With the 2 points mentioned above, it is likely that we are going to see a recovery in the immediate term. With that being said, the question now is how strong of a recovery are we likely to see? I would like to add my thoughts regarding that question below.
Back in May 2020 the DXY was riding the resistance line of the diamond pattern around $100 flirting with a breakout to the upside. Not only was the DXY looking like it wanted to break up out of the macro diamond pattern, it was also in a micro symmetrical triangle pattern that was forming at the top of the diamond near resistance. This symmetrical triangle pattern broke to the downside and the sell off took us to around $95.75. From the $95.75 low of that first leg down the DXY had a perfect retrace to the 0.618 Fibonacci level before reversing to the downside once again and ultimately breaking out of the diamond pattern to the downside. This is the leg down that we just experienced taking us to $92.55.
I did notice that both the mean line of the Bollinger Bands and the 0.618 Fibonacci retracement level from this most recent leg down are at the same spot on the graph at around the $93.50 level. With everything mentioned above I think this is the most probable target for a retracement. This would also be sufficient enough to reset the RSI with a trailing 14 candle setting. I believe at that point we are ready to continue the move down to our target of $80 and we can do another update at that time when the charts and fundamentals play out more.
EXTRA NOTES REGARDING CRYPTO
I am not going to go in depth too much regarding this next point (if you want me to do a detailed analysis i'm not opposed to doing so if you send me a message) but my investment thesis is to go long bitcoin and other select alt coins to hedge against a weakening dollar so I would just like to make a mention of it:
Alt coin markets have been RED HOT especially defi. I've personally had over 10 trades in the space that made me triple digit percentage returns, unleveraged, with in the last several weeks. Bitcoin has been the least volatile while alt coins have been on a tear. Long story short the majority of them are due for a pullback and the Bitcoin dominance chart is showing bullish divergences. Pair the BTC.D with everything I've mentioned in this post and I think we see alt coins specifically pull back in the immediate term against both the dollar and bitcoin.
Keep in mind that can play out a couple ways. Either Bitcoin continues to consolidate at these levels while alt coins have a minor pullback or bitcoin also starts to pull back to test old resistance as new support (which would still be healthy for the market including alt coins long term) and alt coins get reckt. Either way, I still think its a hodl and buy the dip type of environment.
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