Analysing USDX' recent history. Insight into causes of rally.
The chart is a about 2.5 years of weekly pricing of the US Dollar Index USDX.
Simply, illustrating 3 examples of positive divergence for the Dollar and why the $-rally has grown to such an enormous force here at the end of 2024.
My analysis left me wondering about the high to lower-high on RSI which over the same 2.5 years led to a higher high recorded in 2024 (recently), positive RSI divergence, which should correlate to even higher USD Dollar rally's at the start of 2025.
But instead, clearly seen in the RSI chart, the recent withdrawal of the RSI from the USDX from overbought territory in the RSI and retreating back to a level well under 70.
But I see a reversal-swing back into overbought territory on the RSI > 70 causing more momentum back into the Dollar and this increase back into overbought / outperforming would be consistent with the bullish RSI divergence outlined last above, which cals for an even higher USDX.
It would not surprise me to see the USDX climb to 111 during 2025.
Why? How? If you look across at the corresponding historical weekly candle you will find the 7 Nov 22 weekly candle which is a big candle and it closed at 111.
It makes me wonder about Gold's direction. Bullish but capped somewhat until the Dollar finishes its upwards move.
This will also occur in 2025 when the Dollar will eventually retreat as historically evidenced here in the USDX RSI weekly. It shows severe overselling and the resultant bull-rally to the opposite where the dollar outperforms/overbought and eventually has to correct its pricing by becoming less overbought.
All can be seen in the weekly RSI chart.
