6:00 am Pacific
With a much anticipated fresh Fed policy statement coming Thursday, this should prove to be a critical week for the greenback. The U.S. Dollar Index, a very crowded trade for more than a year, continues to look increasingly weak and vulnerable. That’s an underlying positive factor for the Venture and commodities in general which often move in the opposite direction of the dollar.
The consistent position we’ve maintained over the last several months is that the Dollar Index hit its 2015 high during March-April based on what has proven to be, so far at least, a very reliable 9-month daily chart. Fundamentally, a runaway dollar would not be healthy for the U.S. or global economies, so one can be certain the Fed is keeping a close eye on movements in the greenback (the Chinese appear to be, as well, and recently of course fired some critical shots in the latest currency war).
Dollar Index 9-Month Daily Chart
As you see can see in this chart, trouble began for the Dollar Index in late April when it broke below an uptrend line in place since last summer. It found support at the 93 Fib level before rallying and reacting at the top of the uptrend line (fresh resistance) at the end of May.
Another uptrend line formed from the May low but that was broken as well in August. Again, a rally took the Index recently to the top of that uptrend line, only to meet more stiff resistance.
RSI(14) is also running into a wall at the 50% level and has formed a bearish “M”. This just isn’t a healthy-looking chart.
Despite these technical warning signs, there are still many bulls in the dollar camp as it remains a crowded trade. The potential exists for a serious unwinding of the greenback over the next few months after the record run that started in the summer of last year. This could mean a drop to about 88 which would be very supportive of commodities. That’s not a mainstream view at the moment, but quite often the market is full of surprises – significant dollar weakness during the final quarter of the year could catch many traders and investors off guard.
As of 6:00 am Pacific, the Dollar Index is up one-fifth of a point at 95.34 after falling below Fib. support Friday at 95.42.
Euro 1.5-Year Weekly Chart
While the Dollar Index is showing weakness, the euro continues to gather strength. Recently, it broke above a downtrend line in place for more than a year. A DI cross confirms a trend change to bullish, and RSI(14) is also attempting to break out above previous resistance at the moment.
The euro is climbing an uptrend line and is also powered right now by a rising 50-day moving average (SMA). Key resistance is 115. If the euro pushes above 115, it could really gather some steam and that in turn would weigh on the dollar.
The euro is trading at 113, off one-third of a point, as of 6:00 am Pacific.
noticed that Dajin Resources dji, hit a new high this am with over 500,000 shares traded and bids building at .13 cents. John, you mentioned in one of your chart updates that dji could move to 30 cents pretty quick with little resistance. Any changes?
Comment by Roger — September 14, 2015 @ 7:48 am
Hi Roger, the pattern is a Cup with Handle so one can expect the right hand side of the Cup to move up relatively quickly, but keep in mind this is a monthly chart….not daily so there may be hiccups along the way where it meets resis. such as at 15c. I do not know timewise how long it will take but it looks to be a good bet to reach 30 before the Handle forms.
Comment by John - BMR — September 14, 2015 @ 9:16 am
Great! Thanks John
Comment by Roger — September 14, 2015 @ 9:45 am