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Time For U.S. Dollar Bulls To Surrender?

By David TablishForexFeb 06, 2017 12:24AM ET
www.investing.com/analysis/late-friday-night-charts%E2%80%A6us-dollar-bulls-surrender--200174659
Time For U.S. Dollar Bulls To Surrender?
By David Tablish   |  Feb 06, 2017 12:24AM ET
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The US dollar has closed lower for 6 weeks in a row now, which is testing the patience of bulls. This past week the price action cracked the top rail of the horizontal trading range which is a negative, but no confirmation yet the trend has reversed down. There are several more layers of support that will need to be hit before I throw up the white flag and surrender to the bears.

This first chart is just a simple daily line chart which shows the US dollar closed just below the top rail on Friday at 99.84.

USD Daily 2013-2017
USD Daily 2013-2017

Below is the daily bar chart showing the price action closing below the top rail of the horizontal trading range, matching the low set back in December.

USD Daily Bar Chart, 2014-2017
USD Daily Bar Chart, 2014-2017

There is another pattern we’ve been following which is the double inverse H&S bottom that took about one year to build out. A complete backtest to neckline #2 would come in about a point lower than this past week's low at 98.85.

USD Daily with Double Inverse H&S Bottom
USD Daily with Double Inverse H&S Bottom

Below is the 35-year monthly chart which shows the two massive bases labeled big base #1 and big base #2 which are fractals of each other. Big base #1 launched the US dollar up to its bull market high in 2000 at the 120 area. The US dollar also formed a beautiful bullish rising wedge as a halfway pattern.

If big base #2 is just about equal in time and price to big base #1 then there should be enough energy to propel the US dollar at least up to the 120 area which would be the measured move from the blue rectangle trading range. That would also equal the high of the 2000 top where the US dollar built out a H&S top to reverse that bull market.

At this point in time I don’t see a topping pattern building out yet. It’s possible that this trading range could morph into some type of top, but it should show itself at some point.

USD Monthly 1983-2017
USD Monthly 1983-2017

This next weekly chart for the US dollar puts all the pieces of the puzzle together. This chart shows the blue trading range with the double H&S bottom with neckline #2 almost being backtested this week.

The major uptrend channel began in 2011 at the same time gold topped out. If the bottom rail of the major uptrend channel gives way, that’s where I wave the white flag and surrender to the bears.

USD Weekly 2010-2017
USD Weekly 2010-2017

This next chart is a combo chart which has the US dollar on top and gold on the bottom. Looking to the right hand side of the chart you can see a long brown rectangle. That long brown rectangle shows the inverse correlation between the US dollar and gold at least over the last year or so. If the US dollar is building out a H&S bottom then there is a good chance that gold is building out a H&S top, which the brown rectangle shows.

USD:Gold Weekly 2008-2017
USD:Gold Weekly 2008-2017

Instead of having a horizontal trading range the PowerShares DB US Dollar Bullish ETF (NYSE:UUP) has built out a bull flag as its consolidation pattern. A backtest to the top rail would come in around the 25.50 area which was almost hit this past week with neckline #2 just below.

UUP Weekly 2014-2017
UUP Weekly 2014-2017

After putting in its bear market low in 2011 the UUP has been in a strong bull market, creating its first consolidation pattern just below the top rail of the downtrend channel. After completing that first impulse leg up—which started in the summer of 2014—the UUP went on a vertical move up to the first reversal point in the upper blue flag where it needed to rest.

Sometimes backtests can be quick and clean while other times they can try your patience and make you question whether you are right or wrong. As long as support continues to hold I have to remain a bull, but if I see support being broken in a serious way I will have no problem reversing my stance from bullish to bearish on the US dollar.

UUP Weekly 2007-2017
UUP Weekly 2007-2017

Time For U.S. Dollar Bulls To Surrender?
 

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Time For U.S. Dollar Bulls To Surrender?

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Scott Halverson
Scott Halverson Feb 07, 2017 3:25AM ET
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Dollar bull, and short euro are both losing trades
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hitesh mistry
hitesh mistry Feb 06, 2017 9:36AM ET
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Short term it will be beaeish
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laura leta
laura leta Feb 06, 2017 8:09AM ET
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is it going up or down ?.
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Gopi Rajan
Gopi Rajan Feb 06, 2017 8:09AM ET
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going to be down soon
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WeeChong Lee
WeeChong Lee Feb 06, 2017 8:09AM ET
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depends on which currency pairs you are trading but the macro economics support a stronger USD
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Solomon Lalani
Solomon Feb 06, 2017 8:09AM ET
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Macro economic? There is something above that called geo-political. With Trump in office, investors' confidence is shaky. The man is unpredictable. It's matter of time we will see all things US (Dollar, indices, real estate) will cave in. I am not a fanatic or emotional person; quite opposite in fact. Supporter of US values such as freedom of speech, democracy, tolerance, etc. But the man in office is putting everything on fire and weakening the fundamentals that made US what it is
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