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A great chart look the USD

Cory
January 19, 2017

Here is a post from Rambus focusing on the USD. Ramus is chartist I try to stay up to date with because of his great technical outlook for gold and related markets.

Pay close attention to the support levels that the USD is approaching as well as the major long-term uptrend channel near the bottom of the post.

Click here to visit Rambus’s site, it is worth a look if you haven’t visited before.

I would like to update you on the US dollar as it plays such an important role in so many different markets. Getting the big trend right on the US dollar can help you see what areas are affected by the dollar to invest in. There are a lot of areas that have an inverse correlation to the dollar, such as commodities and the precious metals in particular.

Let start with just with just a simple daily line chart that shows the two year sideways trading range with the breakout and the backtest that is currently underway. As you can see this is actually the 2nd backtest to the top rail at the 100 area so there is no question the top rail is hot.

This next chart for the US dollar is a daily bar chart which I’ve been showing as a rectangle consolidation pattern. If one were to connect the reversal point, #1 and #3 for the top rail, and reversal points #2 and #4 for the bottom rail, we would have an expanding falling wedge. The top rail would be sloping slightly down just a tad which would help in showing the backtest a little more clearly. The difference between the two would only be about a point or so. A good habit to get into when you see there may be a little morphing of a trendline is to tweak it, because it may be tested again at a later date.

Below is the updated version of the morphing rectangle halfway pattern which shows the nearly 2 year expanding falling wedge. The top rail is almost perfectly horizontal, but to get the backtest price objective right, every fraction of a point helps.

Tonight is the first time I’ve shown this chart to you. Below is a weekly look at the US dollar which shows the blue expanding falling wedge and how it fits into the big picture as a halfway pattern to the upside. I’ve shown you many bull markets that form one consolidation pattern on top of the next, which can go on for years. When a bull market ends there is usually a recognizable reversal pattern that will build out which will signal a trend change. As long as the top rail of the blue expanding falling wedge holds support we have a consolidation pattern in place. Until the price action takes out the top rail to the downside we have a consolidation pattern, not a reversal pattern.

Note the H&S consolidation pattern that formed on the right side of the blue consolidation pattern which should give the US dollar the energy it needs to have a successful breakout and impulse move to the upside. After the neckline breakout and the initial breakout above the top rail of the blue expanding falling wedge, the price action backtested the neckline with a nice long daily reversal bar. This week the US dollar is backtesting the top rail of the blue expanding falling wedge. The symmetry of the bigger H&S shows the neckline symmetry line which is parallel to the neckline that showed us the low for the right shoulder.

If the US dollar is in a bull market on an intermediate term bases it should make higher highs and higher lows which creates an uptrend. Note how many touches the bottom rail of the major uptrend channel has which tells us it’s an important trendline. You can do the same thing with the top rail which shows about 4 touches. Also, as you can see the major uptrend channel is not parallel, but more of a rising wedge formation with still a lot of overhead room for the US dollar to move higher.

That brings me up to the measured move for the blue expanding falling wedge halfway pattern. The first price objection is measured from the last reversal point in the blue triangle pattern at the bottom of the chart to the first reversal point in the blue expanding falling wedge. That distance is taken and added to the 4th reversal point in the blue expanding falling wedge to get a price objective up to the 113 area, as shown by the blue arrows, and is called an impulse measured move.

The second measured move is taken from the breakout point from the blue triangle to the first reversal point on the blue expanding falling wedge. That distance is then taken and added to the breakout point of the blue expanding falling wedge which gives us a second price objective up to the 117.30 area. This is called the breakout to breakout measured move. This is on a linear scale chart.

This next chart is a log scale weekly look at the US dollar which gives us a little higher price objectives based on the two measured move techniques. If one was to look at the price action since the 2011 low and you didn’t know what stock you were looking at you would most likely think that this stock is in a beautiful uptrend.

This next chart is a 35 year monthly look which shows the two big fractal bases labeled big base #1, and big base #2. Back in the late 1990’s when the US dollar broke out of big base #1 it formed the blue bullish rising wedge as a halfway pattern. That backtest to the top rail took three full months to complete before the second impulse move took off. If our current blue halfway pattern plays out it will have a price objective up to the 120 area which is about as high as the 2000 bull market high. At that point we can look for another consolidation pattern to start building out if the US dollar is in a strong secular bull market. If this rally is like the last major impulse move up out of big base #1 then we should see some type of reversal pattern build out similar to what we saw at the 2000 high. That H&S top in 2000 built the foundation for gold’s bull market to follow, which lasted close to 11 years.

Again, if the US dollar is in a secular bull market then it will most likely have a negative impact on commodities and the precious metals complex. For those members that were with us during the strong impulse move up out of big base #2 you will remember what that did to commodities, the precious metals complex and most of the important currencies of the world. With that said I’m paying especially close attention to the commodities indexes for any sign of failure. The chart for the $WTIC I posted earlier today is a good example of to watch for. The price action will let us know of its intentions if we can keep an open mind. It is what it is until it isn’t. All the best…Rambus

Discussion
21 Comments
    Jan 19, 2017 19:13 PM

    If Obama pardons The Clintons, Bill and Hillary, then he is surely saying they are guilty, it will be interesting to see if he goes down that road, it will ruin his credibility the little that is left.

      DC
      Jan 19, 2017 19:33 PM

      Well spotted, DT. I hadn’t thought of that side. Yet, an obvious conclusion in the face of it.

        Jan 19, 2017 19:14 PM

        Book em ….Dano………O is headed to Hawaii

          Jan 20, 2017 20:16 AM

          5hrs……….and 45min…………….bye bye…

    CFS
    Jan 19, 2017 19:00 PM

    DT, Obama cannot pardon Hillary. She has not been charged yet. Even the exiting Empoorer does not have the power to pre-pardon.

    Nomi Prins:
    http://usawatchdog.com/end-of-2017-gold-up-dollar-down-nomi-prins/

    CFS
    Jan 19, 2017 19:27 PM

    China injects a record 1.034 trillion yuan (151 billion usa) into bank liquidity ahead of their new year.

    CFS
    Jan 19, 2017 19:33 PM

    No real change from the ECB: they leave QE at 60 billion euros per month but may revise higher or lower:

    This does probably imply, however, a slowly dropping Euro from here on out.
    (Barring collusion with the Fed)

    That does imply an upward direction for the US dollar, to counteract the sale of Treasuries held by China.
    Which will win out actually depends on exact rate of dumping of Treasuries.

    CFS
    Jan 20, 2017 20:19 AM

    HONG KONG (AP) — Paramount Pictures said Friday it has inked a co-financing deal with two Chinese companies for the Hollywood studio’s slate of movies over the next three years.

    Under the terms of the deal, Shanghai Film Group and Huahua Media will also set up an office on Paramount’s lot later this year, the studio said in a statement.

    The Chinese companies will provide roughly $1 billion to finance at least 25 percent of Paramount’s films, according to a person familiar with the deal who was not allowed to speak publicly.

    Film industry publications cited the same figures.

    Paramount is planning to produce 15 to 17 films in 2017.

    It’s the latest China-Hollywood tie-up, as both sides aim to beef up their presence in each other’s movie industries.

    Chinese investors have been expanding into entertainment companies overseas in a bid to boost the country’s international cultural influence, also known as “soft power,” as well as acquire expertise. Foreign producers, meanwhile, are seeking greater access to China’s growing film market.

    Last year, Chinese conglomerate Dalian Wanda Group teamed up with Sony Pictures to make big-budget films while Steven Spielberg’s Amblin Partners partnered with Chinese e-commerce giant Alibaba Group’s media arm to co-produce films for global audiences.

    Paramount Pictures has already cooperated with Huahua on several films including “Transformers: the Age of Extinction” and “Jack Reacher: Never Go Back.” Shanghai Film Group was an investor in the latter movie.

    CFS
    Jan 20, 2017 20:21 AM

    BEIJING (AP) — China’s economic growth sank to its lowest level in three decades in 2016 as Beijing braces for a trade battle with U.S. President-elect Donald Trump.

    Growth in the quarter ending in December ticked up to 6.8 percent over a year earlier.

    CFS
    Jan 20, 2017 20:24 AM

    SGE: gold 1218.7, silver 18.17

    Jan 20, 2017 20:19 AM

    If nothing else, Rambus is thorough. Always an insightful read. Not always correct, but who is? Has a decent record though.

    The second back test of support that was previously resistance in his first chart is strong evidence of a trend developing

      CFS
      Jan 20, 2017 20:04 AM

      I am substantially in agreement with the Big Picture Trading forecast.

      He fails to mention Uranium is a definite near term buy, while gold mining shares are an accumulate for a longer term hold.

    CFS
    Jan 20, 2017 20:11 AM

    Meanwhile at Davos:
    The Latest: UK’s Hammond Puts Some Brexit Blame On Blair
    Associated Press – 55 minutes ago
    DAVOS, Switzerland (AP) — The Latest on the World Economic Forum in Davos, Switzerland (all times local):

    3.10 p.m.

    Britain’s Treasury chief, Philip Hammond, says the former prime minister, Tony Blair, is partly responsible for the country’s vote to leave the European Union for failing to introduce measures to limit the flow of people from countries that joined the bloc in 2004.

    Hammond said June’s vote showed there was a “strong strand of feeling” against the uncontrolled movement of people within the EU and he laid the responsibility for that “squarely at the door” of Blair.

    Blair, who was prime minister from 1997 to 2007 and remains a keen EU advocate, did not impose transitional controls back in 2004, when ten countries, mostly from eastern Europe, joined the EU. Most other EU countries did impose restrictions, meaning that Britain took the “full force of the tide,” according to Hammond.

    (Clearly another swamp needs draining as Treasury Chief Hammond is much more interested in retaining power, than in doing what is best for the UK.)

    CFS
    Jan 20, 2017 20:17 AM

    http://www.marketwatch.com/story/why-the-stock-bulls-will-keep-trampling-over-your-trump-fears-2017-01-20

    But I personally would stay clear of the bond market for now, contrary to Rick.

    (But I’m not good at TA)

    CFS
    Jan 20, 2017 20:20 AM

    I was wrong about platinum reaching $1000 this week, but it is taking off again today.

    CFS
    Jan 20, 2017 20:46 AM

    https://www.youtube.com/watch?v=nNYOc5a5Z1s

    Drain the swamp and lock up Hillary and Soros!