Working Money magazine. The investors' magazine.

Traders.com Advantage

HOT TOPICS LIST


INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?

PRINT THIS ARTICLE

CHART ANALYSIS

Is US Dollar Tipping Market Direction?

11/01/02 11:01:49 AM
by Gary Grosschadl

Movement in the $USD often serves as a strong clue for upcoming direction for the main indices.

Security:   $USD
Position:   N/A

When I have difficulty in deciphering where the Dow/Nasdaq might be going in the short term, I often check on the $USD. The last time I wrote about the $USD tipping the market's direction it was accurate and timely. Now it seems to be making a downside move as the main indices move sideways, perhaps acting as another harbinger of things to come.

The daily chart shows some interesting points. The $USD has been in a sideways channel for several months but now has weakened into a triangle downside break. This could signal that the lower channel might be breached again, as opposed to another bounce up. This extra bearishness could coincide with the main indices heading down.

Graphic provided by: stockcharts.com.
 
The displayed indicators are sending somewhat mixed messages. The ADX shows weak directional strength and stochastics are in oversold territory which suggests that the $USD could turn up any time. However the MACD and RSI indicators are still bearish and have room to fall suggesting more downside play is possible.

Also on the chart is a prior "spring" effect. A spring occurs when an unsustained higher or lower movement is made outside the current channel. The result is a slingshot move to a similar piercing of the channel on the opposite extreme.

Traders should watch if this triangle break does lead to a breach below the channel. If so, this may set up another spring. Also, is this negative action in the $USD setting up the main indices for failure just around the corner?


Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

Website: www.whatsonsale.ca/financial.html
E-mail address: gwg7@sympatico.ca

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 11/02/02Rank: 4Comment: When will USD start going up Gary and how 1 how much will it move upwards on a daily basis average.Kindly mail me at chattdhruva@yahoo.com if you can.would be obliged.
Date: 11/02/02Rank: 5Comment: 
Date: 11/03/02Rank: 5Comment: Yes I agree, it would appear the dollar has broken down to the downside signaling possible further falls. Looking at the $VIX now dropping through 35 points for the first time since mid August and passing through its 50 day SMA, I believe this is a further indicator of another fall to come shortly.
Date: 11/05/02Rank: Comment: I ve been thinking about the same for sometime now and noticed back in last July how the dollr turned up from its lows 3 days before the Dow. This time round it seems that the market is factoring a cut in interest rates from the Fed of around 50 basis points and that would be bearish for the dollar while perversely supportive for stocks in the current mood. Would the Fed do nothing this week we might see a bounce in the dollar.
Date: 11/05/02Rank: 5Comment: 
Date: 11/06/02Rank: 4Comment: 
Date: 11/17/02Rank: 3Comment: Would have been better without all the nonsense indicators.
PRINT THIS ARTICLE






S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2024 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.