Dollar Showing Strength?

The US Dollar has made quite the rally. However, I don't think it's due to fundamental strength. Quite the contrary. I think it's due to the liquidation of other assets and instruments such as the US stock markets. They've been taking a beating the last few weeks. But since the greenback doesn't really have any real strength, I think it's only a matter of time until dollars get dumped for something else. That's just my uneducated opinion. I'm sure it's not original nor unique, but I haven't browsed around for any commentary that is in agreement. It's just a hunch.

Below is a 4 hour chart of the US Dollar Index (DXY). The aqua and yellow moving average looking lines are moving average forecasts. They don't track price, but give a general idea on direction and timing. They will invert, as many cycle line type forecasts will ie Bradley Index, Mass Pressure Index, and most planetary cycle composites. But when they turn, or at least show a bump, price usually acts in kind. They can even show possible flat and consolidation areas as well as major changes in direction. I've marked of red X's as possible price and time targets. Even if price doesn't touch those spots, I think that the gray vertical lines will still be significant turns. Those targets are based off of the same geometric concept I used in my very first forecast that is talked about in the first entry of this blog.



And now about the market turn forecast method I mentioned in the last entry. Unfortunately, I lost the image that showed the details for that particular GBP/JPY chart. But I do have an example for the USD/CHF. This is not a pair I normally trade so I when I created this example, I wasn't too familiar with the movements or ranges. This pair mirrors the EUR/USD pair, which I don't really follow at the 1 hr. detail.

The method is simple and is one I discovered in my early days of trading the foreign exchange market. Many PC charting packages have the ability to draw trend lines as rays. In other words they go on forever. What I noticed was that when these lines would intersect there would be a reaction in price. I'm not talking about breakouts from a triangle, although that is the best example. I'm talking about what seems like completely unrelated trend lines. The chart below is kinda messy, but it illustrates the idea. Not every intersection will be a reversal. Many times it's just a rogue bar. Other times it's the beginning or end of a run.



The concept isn't limited to just trend lines. Support or resistance lines provide excellent forecasts when intersecting a trend line. There are some other related tricks and ways to optimize the process that I won't go into here, but with experimentation, it shouldn't be too hard to figure out what those are. One thing I will say is that it helps to use fixed scaled charts or squared charts. Otherwise the trend lines will change in angle as the chart is advanced both forward or back and the intersection points will move around. Squared charts are best. Because I was in a hurry, I forgot to square the chart used in this example. It is a fixed scale chart though, so hopefully that minimizes the shift. Once price has advanced far enough, I'll post up an updated chart to see how things panned out.