For now DXY pendulum has swung the other way

Dollar weakening appears to have taken over

I wrote a series of posts that were based on strengthening USD. It appears they were misguided and with just a little bit more confirmation, I may have to conclude the opposite (now just short of a little bit confirmation).

  1. This post predicts a top in the AUDUSD. There is a high possibility of a break and new high for this pair.
  2. This one looked at the DXY directly as well as EURUSD with the obviously wrong conclusion that EURUSD is going South.
  3. This piece on XAGUSD has to be qualified. I am very bullish on precious metals gold and silver and see them reversing years of down trend. I see Dollar strengthening as a opportunity to throwback for a chance to go long at lower. With DXY strengthening, that throwback might be skipped.

 

Chart #1 – DXY did not get support

This first chart shows why I got it wrong. I was bullish most of June, July especially after the index managed to penetrate above May high. Unfortunately a series of poor data from US including poor productivity took the index down. This week we see DXY carry on lower. The last redeeming 2 reasons why I don’t totally write off a bullish Dollar are:

  1. DXY has broken support but still within a rising equidistant channel that suggests it is just printing a higher low.
  2. The very famous Dudley President of NY Fed is speaking tonight and he might just go over the top with his ‘the market is underestimating the resolve of the Fed to raise rates‘ comment.
DXY weekly chart 2015 - present

DXY weekly chart 2015 – present

 

Charts #2-4 – USDCAD ‘this time is different!’

Ok I lose. B W B W B W … and G R G R G R … patterns should never be used in super sophisticated high IQ activities like forex trading EVER!

I published this 15 August predicting a green week. | Source: TradingView.com

So just when I thought I got it sorted out, the market gave a bucket of cold water. This is not how a Dollar strengthening should play out – in fact USDCAD looks like it is breaking that 4-month consolidation triangle the other way. The vast implication – means that WTI weakening view is also likely to be wrong.

USDCAD weekly chart May 2015 - present

USDCAD weekly chart May 2015 – present

For a closer look, this daily chart suggests that formation is broken. Big job for Dudley.

USDCAD daily chart Feb 2016 - present

USDCAD daily chart Feb 2016 – present

 

Charts #5 & 6 – WTI strengthening on weak USD

Now speaking of WTI, I have posted many times that oil data is just day to day noise. The real determinant of crude oil price is USD strength. IN addition, there is that USDCAD – WTI correlation to keep in mind. So with DXY weakening, CAD strengthening, the trend for WTI to look out for is up.

This chart shows WTI breaking every potential resistance on its way up

This chart is serious food for thought. Maybe $25 per barrel is really gen-low.

WTI bullish reversal on weekly chart

 

That interest rate hike and 3 levels traders must watch

I think action is louder than words. If the US was so healthy, why is there so much wringing over 25 basis points. Seriously? I strongly advocate this podcast/rant by Peter Schiff.

In mind my, any scenario involving USD strengthening is 1) technical move only 2) crisis inspired run to least dirty shirt. In fact I personally feel that USD weakening is the true fundamental driven direction.

 

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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