What are your thoughts about the USD? Are you bullish or bearish? Or you just don’t do this kind of analysis?
Look, I always try not to make any pre-judgement and to trade based on what each instruments is telling me.
But sometimes you can use other information (like this one) to help you make batter decisions.
Let me show you this chart and and I’ll get to my point…
This is the US Dollar Index 1W chart:
What can you tell me about this chart?
It traded in a clear range for almost two years (2015 and 2016). Late 2016 it broke through the resistance level.
Now, what I want you to focus on is on the blue rectangle.
For me, it’s not about what the market is doing, but how is it doing it.
It’s very important to visualize the way the market was rejected from the main support level. That pattern (the two candlesticks inside the rectangle) has very strong upward pressure, which tells me that it will probably continue its way up.
Now, we are talking about the US dollar index here, which basically charts the performance of the US dollar against a basket of currencies (EUR[57.6%], JPY[13.6%], GBP[11.9%], CAD[9.1%], SEK[4.2%] and CHF[3.6%]) and we don’t trade this… but this can definitely help you clear things up on other currency pairs, at least for the long term analysis.
So now that we know that the USD is more likely to move up, we can go ahead and analyze the USD against other currencies and see if this can be confirmed.
Remember traders, this is only to confirm your analysis, never take a decision on one instrument because of what other instrument is doing.
Whats your take in the USD?
Do you know why the EUR is weighted 57.6% in the US Dollar index?
Let me know in the comment section.