Did the Dollar Index Just Top?

2022年7月5日

This is a chart of the U.S. dollar currency index with Fibonacci Retracement levels applied.

These Fibonacci levels take the entire history of the dollar index into account as they were drawn from the all-time high in 1985 to the all-time low in 2008.

On the bottom is the monthly RSI. It is extremely rare for an asset to create bearish divergence on a timeframe as high as the monthly chart, as the dollar index just did at the close of June!

Specifically, the dollar index closed June with a higher price than it closed in April but with a lower RSI. When price continues to move higher but the RSI moves lower this is a bearish divergence, and it usually indicates a reversal especially when the divergence occurs at overbought RSI levels. Bearish divergences have similarly been occurring on the weekly timeframes for the dollar index. These divergences are used by experienced traders as sell signals.

Neither the commodity charts nor the Eurodollar Futures are confirming the dollar index's continued move higher.

With the economy slowing rapidly, there's little reason to believe that the Fed will become any MORE aggressive than it already is. If the Fed will not get any more aggressive than is already priced in, the dollar index should not go any higher.

While anything can happen, now that the dollar index has even reached a Fibonacci level, it seems quite likely that a major top is underway.

2022年7月9日

ノート

While the DXY may correct on the short term, this yearly chart suggests a quite long-term bullish breakout: