Monthly Hidden Bullish Divergence Supports DXY Upside Move
A quick post with wide-reaching implications.
I have distorted the charts to really zoom in on the hidden bearish divergence. The price action has a higher low but the MACD and RSI have set lower lows. That action increases the probability that we will see a sustained MACD cross and a uptrend that could last a 18-24 months.
A zoom into the weekly time frame shows a double bottom. There was some chop going into the double bottom so I am not surprised by the chop I currently see at the neckline. That move completing to target puts DXY around 98.
Predicting what will happen in the markets is always confounded by central banks so I hesitate to forecast too far out. If DXY is strengthening that is relative to a basket of currencies. Those other countries may experience increased dollar demand due to their dollar denominated debt, and that just sees the dollar go even higher. The initial move in the dollar could see US equities sell off as they are dollar denominated and other countries market participants cash out to meet their dollar demand. There is also the usual squeeze on the store of value trades/investments in silver, gold and for some, bitcoin. We get into dollar milk shake theory by Brent Johnson out of Santiago Capital but that is a big can of worms to open up. Quite simply I am just preparing for a DXY move to the upside.
I have distorted the charts to really zoom in on the hidden bearish divergence. The price action has a higher low but the MACD and RSI have set lower lows. That action increases the probability that we will see a sustained MACD cross and a uptrend that could last a 18-24 months.
A zoom into the weekly time frame shows a double bottom. There was some chop going into the double bottom so I am not surprised by the chop I currently see at the neckline. That move completing to target puts DXY around 98.
Predicting what will happen in the markets is always confounded by central banks so I hesitate to forecast too far out. If DXY is strengthening that is relative to a basket of currencies. Those other countries may experience increased dollar demand due to their dollar denominated debt, and that just sees the dollar go even higher. The initial move in the dollar could see US equities sell off as they are dollar denominated and other countries market participants cash out to meet their dollar demand. There is also the usual squeeze on the store of value trades/investments in silver, gold and for some, bitcoin. We get into dollar milk shake theory by Brent Johnson out of Santiago Capital but that is a big can of worms to open up. Quite simply I am just preparing for a DXY move to the upside.
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