As a technician, I’m ripping through all kinds of charts on a regular basis. My charting sessions include stocks, commodities, bonds and all sorts of currency crosses. In all of my chart reviews, I can’t find a more perfectly priced asset in the world.
Here’s what I mean. We’re looking at close to a decade worth of weekly bars in the US Dollar Index. Throughout this entire period, the price action has remained within this symmetrical triangle well-defined by two converging trendlines. Currently the price of the Dollar Index is exactly right in the middle of both:
I get asked all the time where I think the US Dollar is heading and my answer over the past six months or so has been, “I don’t know, it looks perfectly priced”. I don’t see much of an edge here long or short. Currently the upper boundary is near 86 and the lower boundary near 75. With prices at 80.50, we’re right in between them. Where’s the edge here?
Gun to my head I would rather be a buyer. Not just because recent support held on shorter time frames, but also because the Euro is a huge component of the index and is currently running into some trouble (see here).
We don’t always have to have conviction on the direction of everything that we look at. “I don’t know”, is okay too. And I think the US Dollar Index is a great example of not knowing and being okay as a spectator. At least for now.
What do you guys think?
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Tags: $UUP $DX_F $EURUSD $FXE