We can see a similar pattern before the end of the crypto cycle in 2017 so we could expect a similar scenario this time as well. If we include the inflation that is coming the target could be much lower but let's be realistic and wait to see the outcome.
My interpretation is, you sell your dollars when dollars are strong (in terms of the DXY basket), not when they are weak or would get weaker, and not when they are neutral. I think we have a higher probability of RSI 70 rather than RSI 50 right now.
Cheers!
fringe_chartist
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I wanted to make sure 2018 wasn't a fluke in the above chart. The same also seems to be true for 2014:
dompa
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@a83hj9jago8w4gb2gvbczxjn35, I don't think so but we'll see. The top at 2018 has had bullish divergence on DXY as i can see and the begging of 2021 has formed a hidden bearish divergence on 1W timeframe.
fringe_chartist
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@dompa, interesting, I can see that as well. I think to some degree the market hasn't yet processed the information it needs for a pop up on the DXY(hence the divergence), and so there's the risk of an imminent downside. I think the index is lying to some degree, waiting on any monetary policy news, and in turn the signals maybe haven't been reliable during the past few months.
Good luck out there either way!
dompa
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@a83hj9jago8w4gb2gvbczxjn35, yes, time will tell. Thanks and good luck too.
dRends35
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I think you need higher time frame to get the most from RSI on a chart like DXY.
dompa
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@dRends35, bearish divergence on a daily timeframe?
dRends35
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@dompa, Yes and perhaps there will be a drop but looks like accumulation in the upper quadrant of the weekly with bullish divergence since Aug '20.