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TECHNICAL ANALYSIS


Third Time's The Charm?

03/29/11 07:51:44 AM
by Austin Passamonte

Here's the midterm price outlook for the US Dollar Index.

Security:   DX
Position:   N/A

It's no secret to anyone in the financial world that the US Federal Reserve is on a sustained and aggressive weak-dollar policy from all points of attack.

FIGURE 1: US DOLLAR INDEX, DAILY
Graphic provided by: NinjaTrader.
 
Highs in the low 90s a couple of years ago against a basket of foreign currencies versus near-term lows at the 76 level marks a dramatic drop in relative buying power. Swing lows from November 2009 through the swing high in June 2010 was completely erased by November 2010, and DX levels are right back to those double-bottom lows again. See Figure 1.

 
Meanwhile, that up & down price action formed a pretty crisp long-term head & shoulders pattern with the top of the crown near 90 and a neckline near 81. That's a pattern height of nine cents, which projects lower by at least an equal measure from neckline to future lows; 81 minus 9 equals 72 for a measured move suggested to test those low levels sometime in the future to come.

Historical lows are just above the 73 zone (not shown) in this adjusted continuous contract chart. The H&S pattern price projection suggests a revisit to that area, for a double-bottom test should follow a failure of the current triple-bottom test at the 76 price level zone. See Figure 2.

Plenty of conversation already clogs the Internet concerning US dollar destruction, potential loss of world currency reserve status, potential collapse of the US financial system, and so on. Historical data shows DX price levels are slightly lower than the current resting price is today. If the current triple bottom fails to hold and the subsequent 72 zone does not result in a double-bottom bounce from lows, life as the world knows it today could change significantly through the tomorrows ahead.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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