Quick post: Simple and Powerful Adam and Eve Pattern on DXY
Updated
The US Dollar index is one of the most important indexes one can watch to position themselves for long term moves in a wide range of markets. There is its role in currency markets, US equities, bond, anti-fiats like precious metals and cryptocurrencies.
For a basic primer: investopedia.com/articles/forex/051415/pros-cons-strong-dollar.asp
As a quick post this is simply looking at the basics of chart formations and not going deeper. No indicators used. The Adam and eve reversal pattern can be found as a type of double top or double bottom. Here it is a double bottom.
The targeting for this pattern is roughly the 0.786 fib level which falls within the previous high bull trap. I do not see much further upside. Any over-performance would probably be a double top around 115
Long Term the Dollar has a lot of volatility to go through. Way more than people expect. The fact remains that the dollar index is in a decades long falling wedge with many upside targets yet to be reached. I discovered this wedge independently and I don't know of anyone who shared the draw publicly before me. The allegations of dollar death are going to appear really accurate when the dollar is back around 70 before going up above 140. But that is in decades to come.
My trades:
I have taken of my margin long positions in crypto for a while with the exception of one where I was stopped out. I have margin short Matic performing quite well. I am suffering a painful loss of USD value from my Optimism position and having the Matic short perform is helping me hold that position.
Future trades
When this DXY move goes to target it will be time to look for crypto entries. A little physical silver due to how it strengthens my hands. It should be on discount after a wee bit of a dollar pump.
For a basic primer: investopedia.com/articles/forex/051415/pros-cons-strong-dollar.asp
As a quick post this is simply looking at the basics of chart formations and not going deeper. No indicators used. The Adam and eve reversal pattern can be found as a type of double top or double bottom. Here it is a double bottom.
The targeting for this pattern is roughly the 0.786 fib level which falls within the previous high bull trap. I do not see much further upside. Any over-performance would probably be a double top around 115
Long Term the Dollar has a lot of volatility to go through. Way more than people expect. The fact remains that the dollar index is in a decades long falling wedge with many upside targets yet to be reached. I discovered this wedge independently and I don't know of anyone who shared the draw publicly before me. The allegations of dollar death are going to appear really accurate when the dollar is back around 70 before going up above 140. But that is in decades to come.
My trades:
I have taken of my margin long positions in crypto for a while with the exception of one where I was stopped out. I have margin short Matic performing quite well. I am suffering a painful loss of USD value from my Optimism position and having the Matic short perform is helping me hold that position.
Future trades
When this DXY move goes to target it will be time to look for crypto entries. A little physical silver due to how it strengthens my hands. It should be on discount after a wee bit of a dollar pump.
Note
We have a MACD cross that is on the verge of being verified today. This is the first MACD cross since we have broken the yellow dashed resistance line so I expect some fair momentum too the upside.For the moving average guys we see DXY building up strength on the 50 SMA and the next place to stall base on SMAs would be near the 200.
Note
It has been a week since I posted this idea and things have really gone in my favor. The quick post had no indicators on it so I am using my comments to add some indocators. As you can see, we have cleared most of the standard daily SMAs and now just have the 200 above price action. Many times a Adam and Eve pattern will form a handle. If this does for a traditional handle it will be around the 200. Usual strong trends occur after handles.
thepatternsite.com/eadb.html
Note
DXY has done very well since I posted my idea 2 1/2 weeks ago. It finished its week by breaking the resistance line on the main chart and now has followed up with two strong weeks. I am still expecting a handle may develop and DXY can go sideways. This is technically a major challenge for the move and I cannot predict how many weeks of chop DXY is going to give. The significance of this potential chop is a relief rally in anti-fiats. Crypto and precious metals should catch a bid during this ambiguity in DXY's move. I have a few coins I want to swing trade bullish.
Note
It looks like the double bottom I was hoping for did not have the follow through. Double bottom patterns can be a bother because if they don't perform they turn into descending triangles, as this one appears to be doing. The MACD situation looks pretty bad as well.
No idea is perfect but some are useful. I used this idea to short MATIC to great effect as my idea shows higher up.
Note
While the initial W pattern of this trade appears to have fizzled out DXY has shown limited downside and has dome rather well after a pull back. A look at the weekly EMAs shows that DXY has returned to the 200-week SMA to fuel up and now has taken the 100 EMA and now is on the verge of challenging the 50 EMA.My target for reversal is still the black zone between about 110 and 113.
Note
Over the last month DXY has continued to act bullishly after its breakdown to the 200 week EMA. It has broken out of the blue falling wedge and is now approaching technical resistance near the top of the weekly Kelter Channel. The Log MACD has crossed zero and stayed above for a couple of periods, which is quite bullish on this time frame. The purple boxes show roughly what kind of price action happened before and we may expect something similar now. Of course, a bull trap that surges out of the top of the keltner would trick the most people and cause the most pain.Of course, I still suspect in the long run DXY will stall in the grey zone and reverse. I see some strength in select cryptos and again, my suspicion is smart money is building its position while DXY sets up its bull trap.
Note
Price poked right out of the weekly Bollinger Band yesterday and the giveback has been immediate. Price action has reached the top of the falling wedge and early into Friday we have a bearish engulfing candle on the daily. Traditionally the top of the wedge is where we would expect price action to fail but I still suspect it is a bit too soon. I still suspect the range around 110 to 113 will be where this uptrend fails but not enough to place any big bets on it.Either way, a retest of the falling wedge previous resistance is likely. If that is confirmed as support, we could expect to see the uptrend continue with strength.
Note
Here is my latest draw on DXY, and it is one that behooves a new idea to be written up. Often when you have a falling wedge it breaks out to become part of a larger falling wedge. I suspect that is what is happening here. Below both wedges are in blue. You can see the small tight falling wedge and the larger macro falling wedge. There appears to be a quite strong reversal wick sticking out of a bearish weekly gaussian channel. If this draw is accurate we have some 550 days until price returns to the black support like. That can create a fair bull market in crypto due to global forces. It can also signal distrust of the US financial system more broadly. I suspect we will see US equities take quite the slide. As you can see, we can expect to get the weekly Keltner channels completely below the gaussian channel and then price bases out for reversal.
Below is the wider shot of what I am looking at for DXY. This is a very long-term draw that includes the possibility that in 10 years dxy is returning to 2009 levels to create a W reversal pattern as it retest the orange wedge resistance as support.
That would lead to crazy buy pressure on anti-fiats like crypto and precious metals.
Note
Dxy has a lot going on. It has retested the micro wedge previous resistance and is now treating it as support. This gives DXY the chance to move to the macro wedge resistance one more time and try to break out to 106 again. A failure to break the macro blue wedge resistance takes DXY deeper into the crux of the blue wedge.
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