US Dollar – The Big Picture

The U.S. dollar index (DXY) continues to strengthen following very positive long-term bullish price behavior. Although retracements will be seen in the short-term, upward pressure should remain for some time.

Classic bullish trend continuation price behavior:

  • Breakout above 31-year downtrend line in April 2015
  • Consolidation at trend line support for almost 2 years
  • Tests the line as support on multiple months and it holds
  • Breaks out of 20-month consolidation range in November, and ends the month above the consolidation high. Breakout occurred above 100.51 (top of consolidation).
  • Then in December the dollar closes at a new high, the highest monthly closing price since November 2002.

usdindex_mthly_final_jan3_2017-v1

Several primary long-term targets are noted on the chart below. These targets are mostly identified by the confluence of multiple Fibonacci ratio measurements, including retracements, extensions and projections.

Target number 3 identifies the completion of a measured move, where the second leg up (see purple arrows) matches the appreciation of the first leg up. That target of 113.52 is further strengthened by the confluence of two Fibonacci levels close by. Frequently we see symmetry between swings in markets. Therefore, it wouldn’t be unexpected for the dollar to eventually complete the measured move, at a minimum. However, given that we’re looking at a monthly chart it could take some time.

usdindex_mthly_final_jan3_2017-v2

The next key long-term price area to watch for potential resistance is from approximately 105.61 to 106.39. That price zone begins at a prior resistance peak from back in July 1989 and includes multiple Fibonacci price levels. It is followed by a potential resistance zone from around 110.24 to 111.31, and includes the completion of a 78.6% retracement of the long-term downtrend at 110.34.

In addition, if we assume the current long-term uptrend matches the percentage appreciation of the prior move off the 1995 swing low at 80.22 we arrive at a potential minimum target of 109.70. (www.marketstoday.net/en/)

Bruce Powers, CMT
About the Author
Bruce Powers, CMT, is Chief Technical Analyst for MarketsToday.net, a financial portal for the Middle East stock markets, plus Forex, oil and metals, published in Arabic and English. He has over 20 years experience in the financial markets. For the past five years Bruce has written a weekly column on the UAE stock markets titled \'On the Line\' for the Gulf News newspaper, and has appeared numerous times on regional TV shows discussing global and regional markets and economics. Previously, he was President at WideVision, a Dubai based FinTech and IT services company, which developed and publishes MarketsToday. Bruce is a Chartered Market Technician (CMT) and serves as Co-Chair of the Market Technician\'s Association (MTA) UAE chapter, which he Co-founded. For more information you can visit Markets Today at: www.marketstoday.net/en/

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