USD Starting a New Wave Up?
I have recently tried to hightlight a blog on the weekend to provide a different perspective or outlook then my own. This week, the article below comes from the Slopeofhope.com, which is run by Tim Knight. Mr. Knight has provided the opportunity to guest bloggers (such as myself) to post on his website trading ideas and writeups pertaining to the financial markets. The article below comes from a person name Springheel Jack on the US Dollar, and the trading opportunity that exists within it. Hope you enjoy - and a special thanks to Tim Knight and Springheel Jack for the excellent article below.
Possibly the most important question for market direction in the next few weeks is whether the USD is going to start a new wave up and when exactly that might happen.
Now the inverse correlation with equities isn't what it used to be, but while weakened it certainly isn't altogether dead as yet. During the first USD wave up in December equities stayed flat with a slight upward bias but during the second wave up in mid January to early February there was a very significant correction in equities.
During both periods of USD consolidation after those waves, equities rallied significantly, but there is every reason to expect that if another USD wave up gets going, then we will see at least see equities trading sideways over the likely three to four weeks that wave up would take.
It is difficult to get a reliable channel on USD that looks the same between the USD indices and the USD futures, and on my futures chart the bottom trendline of the channel was not touched, though we came within 0.20 of doing so. On the $USD index and UUP charts though it does look as though USD has now bottomed and turned back up.
The lower trendline of the rising lower channel trendline on the UUP weekly chart has been (thoroughly) tested and has held. I have put the SPX in the background of the chart to illustrate my point about equities during the last two USD waves up:
The picture looks similar on the $USD daily chart with the lower channel trendline tested and holding:
So what does this mean for the USD currency pairs? Well, on the XEU weekly chart EURUSD looks as though it has hit the top of the declining channel and started a new wave down, with a likely target in the 1.30 area:
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