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Talking Points:
- USDollar Technical Strategy: Bearish Bias Begins to Take Over
- Break Below September 18th Low Allows for Downside Targets To Be Favored
- RSI(5) Divergence Plays Out And Could Drag USD Lower
The US DOLLAR recently dropped below the 200-day moving average. A move below the 200-day moving average is one of the first widely accepted rules of chart followers to exit long positions. Even though the 200-day moving average rule is widely held, sharp selloffs, if they occur at all, often take time to develop. However, when the 200-day moving average is broken, a typical shift in the mood of a financial instrument takes place. Therefore, the moving average in relations to ‘King Dollar,’ deserves to have your focus front and center.
We recently stated, ‘the long side will continue to be favored absent a daily close below 11,865, which would alter the ascending triangle view into a more bearish stance of a potential triple rounded top formation.’ We have yet to see a daily close below 11,865. However, you can see the newly drawn red bearish channel favors that outcome eventually. Currently, the October 14th daily bar can bring some guidance. As a Bearish Key Day Bar, the daily high of 11,970 should act as a short-term bias point such that price remaining below 11,970 should keep the focus lower. Before the high of Wednesday’s bar, the 61.8% retracement of that daily bar sits at 11,931. This 39 point range is worth short-term focus.
Another discouraging technical development for the Dollar Bulls is RSI (5) divergence. Divergence happens when price pushes higher as momentum tracks lower. Because momentum is seen as a leading indicator when price catches up or reverts to move and direction of momentum, a reversal can take place. Should price remain below the resistance mentioned above of 11,970-11,931, and eventually close below 11,865 while RSI (5) stays below the trendline resistance, the bearish outlook will remain favored. T.Y.
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