US Dollar Monthly Price Chart Bearish Continuation Triangle Pattern

by Olivier on September 22, 2010

Been quite a while since I last annotated and updated the monthly US$ price chart on my public list… At the beginning of the year I cautioned to pay attention to a potential trap for US Dollar traders as the chart was displaying a divergence with the gold price. Gold was making new highs but the US$ wasn’t making new lows. Both instruments are considered to have an inverse correlation. Divergences are a sign to be cautious but they obviously don’t play out all the time. John Maynard Keynes famous quote: “Markets can remain irrational longer than you can remain solvent” comes to mind.

The symmetrical triangle you can see on the monthly USD chart has to be considered a bearish sign for the dollar. As it is a symmetrical triangle we now still have a short term higher lows scenario and the pattern could still be part of a bottoming process. Judging from the overall looks of the chart though, I highly doubt a bullish outcome with price breaking out to the upside. From a technical analysis standpoint one has to expect a resumption of the trend leading into the pattern. In this case a resumption of the down trend is the most probable outcome. An additional signal hinting at significantly increasing selling pressure is the fact the USD now has broken the 0.80 level to the downside.

USD US$ Dollar Monthly Bearish Continuation Symmetrical Triangle Pattern Technical Analysis Price Chart

Up-to-date US Dollar Monthly Chart on my public list.

Keep a close eye on the USD as it is a great way to gauge a potential currency crisis. Crises notwithstanding a falling dollar simply increases the likelihood of a rising stock market and further gains in the precious metals sector.

Remember this is a monthly chart which is not suited for gauging short term price developments. Also keep in mind not to trade your opinions but to follow the charts instead. That being said, the longer the US Dollar stays below 0.80 the weaker the technical picture is likely to get. More and more traders will interpret that as a signal of distribution as big money is getting out of the dollar. Interesting times ahead to say the least.

Thinking positively or negatively about performance outcomes will interfere with the process of performing. When you focus on the doing, the outcomes take care of themselves. – Brett Steenbarger

My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469

Buenas noches!

{ 1 trackback }

Comments on this entry are closed.

Previous post:

Next post: