DanV
Short

DXY - Dollar Index Ready For Reversal Or Retrace

INDEX:DXY   U.S. Dollar Index
Many financial instruments are either positively or negatively correlated and the price action of these instruments would reflect the recent strength in Dollar as represented by DXY             Index.

Due to almost vertical move in DXY             since May 2014 low, has lead many to think that Dollar is so strong that it would just continue in parabolic rise without even normal retracement.

I accept that everything in the public domain in terms of fundamentals suggest that Dollar ( DXY             ) should continue to attain much higher levels which is feasible and in that case we might only get a retrace before continuing higher.

However, there are many factors at play and often very hard or near impossible for us as retail traders to weigh all these and give correct scoring to arrive at a specific level on back of that. But many things could come right out of the blue and seemingly unexpected like the SNB dropping the peg with EURUSD             .

It is very probable that the BOJ's QE has possibly been used by many leveraged funds investing in USD and this could prove to be a potential problem, in that if this was to reverse the tide will turn and could be major catalyst for initiating USD weakness. In fact even Japans Authorities have acknowledge that the weakness in YEN and particularly the speed is not justifiable by fundamental. They also seem to think that Leveraged Funds are the real reason for the pace of YEN weakness.

Regardless, whilst it not possible to state that this will be a major top (though I think it is very likely), at least is now due for normal retracement. If it is to retrace then normal 50% -61.8% of it's rise since May 2014 is to be expected.

Reasons for possible topping (intermediate or reversal) zone are:

1. It has almost retraced 50% of the move from 2001 high to 2008 low and other fib clustering in the region of 93-94.
2. Has reach the upper extremity of the rising trend channel from 2008 low.
3. The move up from April 2011 low appears to be an ABC Zigzag . If correct, then wave C of the zigzag is now nearly complete with minor 5 waves clearly visible. So even if it make new higher high from here this would be completing the final wave v of 5.
4. ADX is fully extended and is approaching 58 on weekly chart with 50-60 often considered the upper limits of the ADX.
5. +DMI is showing potential divergence with price suggesting buying pressure is weaker compared with the previous high in this cycle.
6. On daily chart (see image below) RSI divergence is clearly visible and the last gap up at 91 could be potentially an exhaustive gap which normally appears towards completion of the cycle.
7. Possible time symmetry (see monthly chart) suggest that Jan 2014 is very significant month.

If we have the anticipated retracement or reversal in DXY             , then to varying degree this would be reflected in all USD related assets such as Oil             , Gold             & Silver             etc and USD Currency Pairs.

Hence any bullish trades based on USD strength should be managed well so as not to be caught on the wrong side.

As always, do your own analysis for your requirement. Select to follow me and the chart for notification of future updates. If you like the analysis please indicate this with comments and likes and share it with other you know who likewise might benefit. If you have alternative views please share this with details rather than just dislike so all can learn.


Thanks you for taking the time to read my analysis and hope it proves useful.

DanV
http://www.danv-charting.com
https://www.youtube.com/channel/UChJVIJir7nymD9J3ZWoal-w/feed
https://www.tradingview.com/chat/#E4bnOJSWcO1zDjBG
DanV MOD
2 years ago
Daily Chart with RSI Divergence
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DanV MOD
2 years ago
Monthly Chart with possible time symmetry
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venzen
2 years ago
Thanks, DavV
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venzen venzen
2 years ago
i mean DanV :)
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DanV MOD venzen
2 years ago
YW.
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MrJozza
2 years ago
Looks good. The high dollar was killing me anyway heh
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DanV MOD MrJozza
2 years ago
Hahaha, probably you are fully loaded with Silver and BTC. Just joking. Thanks for your comments :)
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MrJozza DanV
2 years ago
Na, oil price. Thankfully it's bouncing as per my chart but it better stay above this level heh
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DanV MOD MrJozza
2 years ago
Ahh OK. Yeh, I think it is close to reaching a support level. Might take little longer.
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Mickette DanV
2 years ago
The last week action of the SNB tells you an expected reversal is not in sight.
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DanV MOD Mickette
2 years ago
Sorry, don't follow you. The SNB's action resulted in USDCHF giving up most or all of its gain in 2014. It could be the warning shot to USD. ie possibly the first pair to reverse against USD.
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Mickette DanV
2 years ago
Think about the implication of a 550 billion-euro bond-purchase program announcement this week. Where should go the euro currency?
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DanV MOD Mickette
2 years ago
Ahh, I see what you mean. Well I can see it would be USD supportive. But also how much of this has already be factored in along with the potential fearful fall out of Greece saga. That is why I have commented on this that whilst everything in public domain appears to be USD supportive It is almost impossible for me and may be many others to know exactly how much is factored in and what remains. Yet the Wave counts suggest at least USD to make retracement that should last for longer than a week or so. Possibly several months before it might resume the uptrend. Thanks for your comments.Appreciate it.
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Mickette DanV
2 years ago
The ECB start of purchasing sovereign bonds is the strategy to inject cash into the economy and debase the euro.
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DanV MOD Mickette
2 years ago
I follow you. But would you say that just because they will buy that level of Sovereign Debt that USD won't retrace at all for more than few hours or a day or so?

I am suggesting that whatever is to follow, DXY will at lease retrace for several weeks. I don't know how, but the move since May 2014 is very mature and normal market structure argues for retracement even 38.2% of the move from May low.

Nothing goes in straight line. I am not saying it will drop from today. Even if it mike new marginal higher high from today's level for few days more even a week, it still has potential for retracement ahead.

So one to watch in my view
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Nickmail
2 years ago
DXY short term support zone
agree
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DanV MOD Nickmail
2 years ago
Hi Nick. Thanks for sharing that. Great to hear from you.
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Ansari
2 years ago
hi DanV,many thank's.
very nice.
my target is fib 50%(95.87)
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DanV MOD Ansari
2 years ago
You are welcome. Yes, entirely possible. Thanks for sharing your chart.
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Nickmail
2 years ago
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possible close on Monthly
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hussain9 PRO
2 years ago
Thanks a lot . how about this possibility :
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DanV MOD hussain9
2 years ago
Well the wave 1 on your chart is commonly put forward as wave 1. I am not convinced as the price action lacks that impulsive structure even if as many we assume it is a leading diagonal. So in my view it fits better as wave a with the wave 2 on your chart as wave b.

But as alternative what could develop is that the move of the May 2014 low become larger wave 1, we have retracement as wave 2 and then 1 -5 wave cycle that could conclude much higher as you are suggesting. I am not dismissing that possibility right now.

The focus is on retracement at the minimum and the nature of that retracement would give clue for future price action. Hope this helps. Thanks for your question ans sharing your chart.

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hussain9 PRO DanV
2 years ago
thanks for your comment .
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DanV MOD hussain9
2 years ago
YW
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flibbr PRO
2 years ago
So in theory, BTC against the USD should rally. ..
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DanV MOD flibbr
2 years ago
In theory it should. However, if we only have retracement and then continue upward that will only me of very little value to BTC. The other point to remember is that BTC as risk instrument has better correlation to SP500 as I have shown in my chart often, SP500 is very vulnerable and BTC could collapse irrespective of USD
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hussain9 PRO
2 years ago
hi DanV , take a look at my daily chart :
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DanV MOD hussain9
2 years ago
Possibility is there but it is supported by rising momentum you would expect in wave 3. I note for now RSI divergence on daily. That could fail and DXY could explode to the upside as per your counts. But I am not convinced, I think a retracement is minimum that needs to be seen before new swing high in wave 3 could develop.
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hussain9 PRO DanV
2 years ago
yeah sure . always the 3rd wave gives the highest in MACD which is obvious in daily chart and we didn't break the 50 MA daily yet to start a correction . we will just relax and watch where it is going to end .

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thanks for your fast reply and comment .
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DanV MOD hussain9
2 years ago
Agreed. YW
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hussain9 PRO hussain9
2 years ago
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HexVex
2 years ago
How much are you short for ??
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DanV MOD HexVex
2 years ago
Don't follow your question, sorry.
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HexVex
2 years ago
I wouldn't take this guy seriously. Even if he owns this website. He's been calling shorts he can't cover ever since I signed up on Trading View. If you want the S&P to crash and project it for 10 years its got to happen once or twice.
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DanV MOD HexVex
2 years ago
Ahh OK got it. Thanks. Sarcasm won't take you far.
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HexVex
2 years ago
No sarcasm. Just tell everyone how much you got on shorting this and where exactly.
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DanV MOD HexVex
2 years ago
Analysis right or wrong is being shared with good intention. If you have issue with that then rather than just express opinion which are penny a dozen, then publish your own chart and let me and other learn.
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HexVex
2 years ago
No it doesn't work like that. Tell me where you are shorting and for what % of your account. Then I might take you seriously.
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DanV MOD HexVex
2 years ago
That id not these point of these charts. I post long term charts well ahead of time in anticipatory point of view. User would need to consider what tolerance should be allowed and also understand that it could be wrong. I don't see anything wrong with that. If you don't take it seriously then I have problem with that. Wish you all best.
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HexVex
2 years ago
I take it very seriously. This is my bread and butter. Let me know when/if you call a long on something. Or anything with a remote chance of making money.
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HexVex
2 years ago
You're like a naked man in a mink coat shouting the earth will break it's orbit and crash into the sun.
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FX-Bajan
2 years ago
This is a very likely evaluation and analysis pointing to a reversal.
The monthly chart also hit the D extension and should soon confirm with a new candle next week starting the move down.
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DanV MOD
2 years ago
At the time I published the chart I had possible 93 - 94 zone for either a reversal or intermediate top. When trend is strong it some time goes further than anticipated. However, overall I don not feel the bases of my reasoning behind the technical case has been invalidate nor for the DXY bulls to relax assuming this trend is not likely even to pause or make normal retracement.

It seems the wave 5 of the cycle appears to have extended which often so happen particularly it has now taken on a parabolic nature of advance which is not sustainable for extended period and will complete. The updated chart suggest that now the top could form in the region of 98 -99 and could even strike 100. I will review the price action and republish updated chart for clarity when appropriate. Take note particularly of what I now think is the triangle shown on chart which is limiting triangle. These normally are called as the breakout price out if it limited in it's potential. I will take that into consideration when republishing update chart. However, here is the interim chart
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DanV MOD
2 years ago
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DanV MOD
2 years ago
Please see the Updated DXY chart published today
DXY - POSSIBLY AT REVERSAL ZONE
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