Friday Dollar Analysis

Last week I wrote the following about the dollar:

Given the above charts, and the fact nothing has fundamentally changed in the big picture for the dollar, my assessment of the dollar market for the coming week is the exact same as it was for last week: more moves lower with rebounds into the EMAs providing upside resistance

The dollar may be in a position for a technical rebound. Last week there was very little action lower, with prices instead moving in a rounding pattern. There has been a large volume spike over the last week, which may be the sign of a selling climax. Also note the gap higher today and the very strong candle print. There was a strong fundamental reason for the change of direction: dovish statements from the ECB regarding interest rates. I'm suspecting that some of today's action was also some short covering.


So far, the technical indicators are not giving a strong confirmation of a rebound trade. While the A/D and CMF have spiked up, these increases are still new and therefore still possibly transitory. In addition, the MACD is still giving as a neutral reading at best.

The idea of a rebound trade does not mean that the fundamental downward trend that is in place is in any danger of being broken. Prices have still moved through important long-term support levels indicating a strong move lower is already taking place. What is happening is a simple "profit taking" of the shorts. Given the underlying interest rate and fundamental issues underlying each currency, I don't see any reason to the dollar is in danger of a strong rally at this point. But, if you're shorting the market, I would consider taking some profits off the table right now.

Friday Dollar Analysis

Last week, I wrote the following about the dollar:

Given the above charts, and the fact nothing has fundamentally changed in the big picture for the dollar, my assessment of the dollar market for the coming week is the exact same as it was for last week: more moves lower with rebounds into the EMAs providing upside resistance.

Taking a look at the chart, nothing has changed. Prices are below the EMAs, all the EMAs are moving lower and the shorter EMAs are below the longer EMAs.

This week, we learned that US growth for the first quarter was 1.8%, which means the Fed will be under pressure to not raise rates. In addition, we have the following Fed statement:

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

The EU has already raised rates, as has China and a host of other countries. Only the US remains in 0% interest rate land, which will add further downward pressure to the dollar.

Forex Fridays

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There are a few important points on the weekly chart.

1.) Prices have been lower.

2.) The relative strength of prices is currently very weak

3.) There is little to no momentum

4.) We wee a very bearish orientation -- all the EMAs are moving lower, the shorter EMAs are below the longer EMAs and prices are below all the EMAs.




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The dollar has returned to its status of a great chart to show bearish behavior. Notice how the chart continues to print lower lows (points 1, 2, 3, 4) and lower highs (points A, B, C). There are also two downward sloping trend lines that connect the high points of the downward move.

In addition note the bearish orientation of the EMAs (D). All are moving lower, the shorter are below the lower and prices are below all of them.

Forex Fridays

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A.) Prices continue to move through support and are bouncing lower off the 10 week EMA

B.) The EMAs are in a very bearish posture: the shorter EMAs are below the longer EMAs, all the EMAs are moving lower and prices are below all the EMAs

C.) Prices continue to become weaker

D.) The MACD is decreasing, but

E.) The MACD is approaching the lowest level over the last three years.



A and B.) Prices are in a clear downtrend.

C.) The EMAs are in a very bearish posture: the shorter EMAs are below the longer EMAs, all the EMAs are moving lower and prices are below all the EMAs

D.) Prices are right at key support levels.

E.) The MACD is about to give a sell signal.

Forex Fridays

The weekly chart shows a clear downtrend. The MACD and RSI are both moving lower. Prices are moving lower and have consolidated losses in at least on triangle. All the EMAs are moving lower, the shorter EMAs are below the longer EMAs and prices are below all the EMAs.



The daily chart shows a move lower but notice that the technical indicators are weakly indicating a lower move. The trajectory -- the steepness of the RSI and MACD -- aren't that severe right now.

Forex Fridays

The weekly chart shows the strength of the downtrend -- even when the dollar made a second top both the MACD and RSI printed lower. Also note that prices consolidated in a triangle pattern as they fell and then moved lower. Finally, the 10, 20 and 50 day EMA are all moving lower, the shorter EMAs are below the longer EMAs and prices are below all the EMAs.


The daily chart shows the consolidation and fall in more detail. Notice the triangle consolidation pattern followed by the move lower. Also note the EMA picture -- the shorter EMAs are below the longer EMAs, prices are below all the EMAs and all the EMAs are moving lower. Also note the 20 day EMA provided upside resistance for prices last week.

Bottom line -- this is a bearish chart.

Forex Fridays

The weekly chart shows a security that wants to go lower. The MACD and RSI are both declining. All the EMAs are moving lower. The shorter EMAs are below the longer EMAs and the 10 and 20 day EMA have moved through the 50 day EMA.

However, the daily chart shows there is strong support at the (roughly) 78 area. Prices broke through the lower line of the triangle consolidation, fell to the 78 area and have now moved higher.

Forex Fridays

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Prices are consolidating in a triangle pattern. In addition, we have a declining MACD and RSI along with a bearish EMA picture (The short EMAs are moving lower, the 10 day EMA has moved through the 50 day EMA, the 20 day EMA is about to move through the 50 day EMA and prices are below all the EMA).


The daily chart shows more detail regarding the consolidation pattern. Note that prices have been moving lower for over a week. While the MACD has given a sell signal notice the lack of sharpness in the overall direction of the indicator. A true sell signal would occur at a sharper angle. That does not make this signal less valid but it is something to consider. Also note the EMA picture is very bearish -- all the EMAs are moving lower, the shorter EMAs are below the longer EMAs and prices are below all the EMAs.

Forex Fridays

There are two important points to make about the weekly chart. First, the MACD and RSI are signaling a lower move ahead. This jibes with the price pattern which says prices are consolidating in a triangle pattern before a move lower (based on the indicators).



The daily chart confirms that we have a high probability of moving lower. First we see the price consolidation in more detail. Secondly notice the full stochastic is giving an over-bought reading. Stochastics/oscillators are better to use when prices are in a range which they clearly are.

Forex Fridays

Overall, the downward trend from the double top continues. Prices are moving lower and the MACD and RSI are confirming the trend. The 10 and 20 week EMA are also moving lower with the 10 week EMA going though the 50 week EMA and the 20 about to follow suit.



The daily chart is a great example of bear market rallies -- it contains two. Notice how prices are moving lower but the lower movement is interrupted by several pennant and flag patterns. These are classic bear market corrections.

Forex Fridays

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The weekly chart still has a bearish bias. Both the RSI and MACD are moving lower. Prices are below all the SMAs. The 10 week SMA has moved below the 20 week SMA, and the 10 week SMA has been moving lower for the last two months.


While the general tone of the daily chart is negative, prices are currently in a bear market flag/pennant pattern. First, note the SMA arrangement -- all the SMAs are moving lower and the shorter SMAs are below the longer SMAs. Prices rallied starting at the beginning of June, but they ran into upside resistance at the 20 day moving average and have since moved lower. While both the MACD and RSI have risen, the price drop frm the 20 day SMA indicates a prices are probably still in a downward trend.

Forex Fridays

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On the weekly chart, notice prices have fallen through a bear market flag pattern that formed a few weeks ago. Prices are now through all the weekly SMAs which would provide technical support; they will now provide resistance on an attempted upswing. Also note the MACD and RSI are dropping. Both have room to run lower.


The dollar is once again a bear market chart. The MACD and RSI are both moving lower. Prices are below all the SMAs, the shorter SMAs are below the longer SMAs and all the SMAs are moving lower. The drop started at the beginning of March right when the stock market rally started. Interesting....

Forex Fridays

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On the weekly chart, notice the dollar formed a double top. But also notice the second double top has weaker underlying technicals -- the RSI and MACD both trended lower. After prices fell from the second top, they formed a bear market flag pattern. But prices have now fallen from that level as well. This move is confirmed by the falling MACD and RSI.



The daily chart shows the bear market flag pattern in more detail. Also notice the bearish price/SMA alignment -- prices are below the SMAs, the shorter SMAs are below the longer SMAs and all the SMAs are moving lower. In addition, the RSI and MACD are both moving lower.

Bottom line? This is a bearish chart, plain and simple

Forex Fridays

On the weekly chart, notice the clear double top formation along with the lower RSI and MACD reading on the second top. Prices fell from that level and formed a bear market flag pattern. However, prices have now fallen from that level and are moving towards support at the 50 week SMA. Finally, the RSI and MACD continue to move lower, indicating this trend will most likely continue.


On the daily chart we see the downward move from the bear market flag more clearly. In addition, prices are below all the SMAs, the shorter SMAs are below the longer SMAs and all the SMAs are moving lower. Finally, the RSI and MACD are moving lower. Bottom line -- we have a very bearish pattern developing on both the weekly and daily chart.

Forex Fridays

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It's been really interesting watch the weekly chart evolve. Prices formed a double top over the last 6-9 months but have since fallen from the second peak. Notice how both the RSI and MACD printed a lower point on the second peak giving a possible signal that a double top was forming. Prices have fallen from the double peak and formed a bear flag. However prices are now below that level as well.



The daily chart gives us a better reading of the bear flag break down. Notice following events in the following order.

1.) Prices hit the top line of the bear flag. The stochastics give a sell signal

2.) Prices break through the lower line of the bear flag

3.) Prices rebound into the 10 and 20 week SMA but the Stochastics say sell. Also note the MACD has started to move sideways and is getting closer to giving a sell signal

4.) Once prices break through the lower support line the stochastics are less imporant because they are more of a pattern signal. Now the MACD becomes more important

5.) The MACD gives a sell signal a bit after prices move through the lower supoprt line.

Forex Fridays

The weekly charts shows the dollar made a double top with the first top occurring at the end of last year and the second top occurring at the end to the first quarter of this year. However, also note the second top had a lower RSI and MACD reading making it suspect. The dollar has since sold off but is currently in a bear market flag pattern. Finally, notice that prices and the 10 and 20 week SMA are in a tight formation indicating a lack of overall direction.



The above chart shows more clearly the trend break from the second top and the current bear market pennant pattern. While the MACD and the RSI are rising, notice that prices haven't jumped higher in one direction or the other. Instead, they're in a tightly contained pattern. Also note that prices are the SMAs are in a tight pattern indicating an overall lack of direction.

Forex Fridays

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The weekly chart shows the dollar formed a double top over the last few months. This is confirmed from the RSI and MACD forming lower tops. Now prices are consolidating near/around the 10 and 20 week SMA. The longer term trend represented by the 50 week SMA is still moving up. But the 10 and 20 week SMA are meandering a bit. They are still higher, but with less strong trends.


The daily chart is very interesting. First, we can see the price drops from the upward sloping trendline that started in mid-December. But prices are now consolidating in a triangle pattern. In addition, prices and the SMAs are in a tight bunch, indicating traders don't know where to send prices next. The MACD is neatral. The RSI is rising but weakly while the stochastics are at the top of their range indicating prices would retreat.

Forex Friday's

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The weekly chart shows the dollar is deciding whether it wants to form a double top or continue rallying. In the "continuing to rally" camp there is a bullish indication from the MACD, the fact that prices have moved through previous highs the fact that prices are still in a confirmed uptrend. In the "we're forming a double top" camp is the lower RSI for the second peak than the first peak along with the weak candles at the very top (a spinning top followed by a strong move down).


On the daily chart notice the following:

-- Prices have broken through the trend line started in mid-December

-- The MACD is giving a sell signal

-- Prices ran into a lot of resistance around the 89 level, which is just above the previous peak

-- Prices have moved through the 10 and 20 week SMA

Forex Fridays

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On the weekly chart, notice we're clearly forming a double top now. Also note the RSI is increasing and the MACD is about to have a bullish crossover. All the SMAs are moving higher, although the 20 week SMA is about the 10, and prices are above all the SMAs as well.




On the daily chart, notice we're in a clear uptrend that started in mid-December. Also note that prices are above all the SMAs, the shorter SMAs are above the longer SMAs and all the SMAs are rising. The MACD is rising and the RSI shows increased price strength. The main issue now is will prices move above the previous high?

Forex Fridays

The main issue on the weekly chart is that dollar prices have not risen to previous highs. They still could, but they haven't gotten there yet. The SMAs are sending mixed signals. The 20 and 50 week SMAs are moving higher while the 10 week SMA is moving lower. Also note the 10 day SMA just crossed below the 20 week SMA, although prices are still above all the SMAs


On the daily chart we can see a solid triangle consolidation pattern forming. Also note the 10 and 20 day SMA are moving higher while the 50 day SMA is moving lower. The MACD and RSI aren't much help on this chart as both are pretty stagnant right now.