On the charts posted below, the top chart below shows this 'Inverted neck and Shoulders' pattern, it was always going to be a long-shot for the USD index to make any meaningful progress above this line on a first attempt, particularly given how rapid its gains from last year's lows had been. --- However, this line is of even greater significance than merely being a 'Head and Shoulders' neckline. The second chart below shows this same line on the Monthly USD index all the way back to the early 1970s. This line has acted as major resistance, and has repelled all five previous approaches when the USD index has moved up sharply from much lower levels. The 2 smallest corrections being 6.9% and 7.4%, the other 3 corrections all led to much deeper retraces for the USD index. I must just emphasise that it was eventually breached after the 2 smaller corrections, though not without a fight, in the case of the 1999 breach. If this pattern were to continue, and the index fails to break and hold over the resistance line this month, then it is possible that at a minimum the USD index may see a correction of close to 7% over the next couple of months.
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Interesting comment on the USD Index.. A couple of questions. Firstly do you think the USD index will eventually break higher. Secondly the earlier analysis you refered to on the 'Pivotal Week Ahead' article, also commented on US stock indices and the US 10 year, could you provide an update on your views with regard to these................................ P,s. Thank for the excellent items of recent weeks. I see you have only recently started this blog, the quality is already of a very high standard, keep up the good work.................
ReplyDeleteDon.
ReplyDeleteThank you for your kind comments. --- At the moment I have an open mind on the USD index.. In the longer-term , and I know this may sound like a bit of a cop out,, but when it is so close to such a major pivotal level, it really is a case of it can go either way. However, my hunch is that given the Global Deflationary headwinds, this may ultimately favour a stronger USD, however it has some work techinically to overcome the key resistance, and it may be well into next year before this is resolved.
With regard to the US 10 year and US stocks. I am planning to do an update on both some time this week, perhaps later today if I can squeeze it in.....
Cheers
G70