Saturday, March 13, 2010

U.S. Dollar Index

The charts below show that the USD Index has reached levels that could offer resistance ot any further rally.

Chart One
The rally that commenced in late November 2009 has traced out an A-B-C pattern that has reached harmonic levels in two ways.
  • An extension of a factor of 1.618 applied to the initial rally (XA) suggests that there will be resistance at 81.06. As can be seen, the market traded slightly above that level in February but has since lost momentum and has stalled just below the 81.00 level.
  • If we look at the relationship between wave A (XA) and wave C (BC) we see that BC = XA at 80.82--once again in the vicinity of the current trading range.
  • The trend line extending from XB is currently near 79.50 which is slightly below the Friday's close of 79.81. This is an important trendline and if it were to be violated lower prices could be anticipated.
  • Momentum indicators have waned since mid-February suggesting underlying weakness in the market.

The longer term chart below shows yet another PHI relationship. The time of the rally from March 2008 to March of 2009 is equal to the time from the March 2009 top to the current time frame--which could represent a market pivot point. It is also worth noting that the rally from the November 2009 low has encountered resistance just above the 38.2 percent retracement of the 2009 trading range. The parallel trendline originating from the December 2008 low at 77.69 is creating resistance near the harmonic levels where the USD Index has recently lingered. The market activity in the current price and time coordinates warrants close scrutiny since the dollar could possibly commence a decline which in turn may cause other markets--bonds and stocks--to react--possibly violently.


1 comment:

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