The DXY has been stalling since 24 Nov. and the weekly chart reveals an important resistance. Let’s take a look if the USD is about to break out - or crash.
Stochastic: The Stoch is in overbought territory for the past 161 days. This is the longest period since 2015, and a dip into oversold is due.
Pitchfork: The pitchfork and its internal Fibs appear well-respected by price. The outer boundary now provides resistance. DXY is stalling precisely at this point and formed a triangle.
Elliott: Price is in the 50-62% retracement zone but has not hit the 61.8 Fib mark. The EW count is difficult. We are able to ‘force’ a completed ABC count with 5 sub-waves in wave C. Alternatively, we can count a completed wave 3 and expect a lengthy wave 4-correction towards 94 (the 38.2% retracement).
How I trade it: Even though the ascending triangle is a bullish formation, a few factors point at a strong resistance. The idea is to build short exposure after a break below 96, in case the bearish assumption is correct, and to exit the position if DXY continues to range outside of the pitchfork.
The dollar has been strong even during the pandemic. The lowest it ever got was around 89.2. Ever since 2014, the dollar rose through the mid-point 88.00 to reach an all time high in 2015 when Fed had indicated a rate increase. Now the same is happening again, the Fed wants to raise rates.
I think the biggest piece of news everyone is waiting for now is 4Q21 GDP to be released on 27 Jan 2021. Till then, DXY would be moving sideways.
Lets not forget that the 3Q21 actuals was revised upwards from 2.0% to 2.1% to 2.3%. This itself would mean it would not crash now.
If 4Q GDP comes in at or above fcst @ 6.5%, then most likely DXY will continue up. Lets not forget, even when 3Q GDP was a huge disappointment, it still went up.
Ever since 2014, the dollar rose through the mid-point 88.00 to reach an all time high in 2015 when Fed had indicated a rate increase.
Now the same is happening again, the Fed wants to raise rates.
I think the biggest piece of news everyone is waiting for now is 4Q21 GDP to be released on 27 Jan 2021. Till then, DXY would be moving sideways.
Lets not forget that the 3Q21 actuals was revised upwards from 2.0% to 2.1% to 2.3%. This itself would mean it would not crash now.
If 4Q GDP comes in at or above fcst @ 6.5%, then most likely DXY will continue up.
Lets not forget, even when 3Q GDP was a huge disappointment, it still went up.