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DOLLAR WEAKNESS ESTABLISHED

  • Daryl Guppy
  • 25 May 2017

We had high hopes for the dollar and we were wrong. We expected support near $0.99 to hold.  Instead it has failed so our next task is to use the dollar index chart to set the potential downside targets.

One important point about the relationship between analysis and trading. We use chart analysis to identify high probability support and resistance levels. We use chart analysis to identify points where there is a higher probability of a shift in the balance of probability that leads to a trend change. High probability does not mean infallibility so every trading analysis includes the condition which signals that the analysis is incorrect. This is the stop loss.

The fall below $0.99 was the condition that told us the previous analysis was incorrect.

The dollar index chart has been dominated by a very broad sideways  trading band  that started in March 2015.  The upper level of the band is resistance near $1.00.  The lower edge of the band is support near $0.93. We noted the dominant feature on the weekly Dollar Index chart was the broad between $0.93 and $1.005. This trading band has dominated Dollar index behaviour since 2015 January. The move above $1.005 was very important because its a breakout from this prolonged 22 month sideways trading pattern. The mid-point of the band is around $0.97.

When price moved above $1.00 there was a good probability the price would continue to trend upwards. This did not happen.

Normally price moves in rallies and retreats between the upper and lower edge of the trading band.  With the dollar index, the price has oscillated around the midpoint near $0.97. The result is rally and retreat behaviour that does not test the support and resistance levels.

The Dollar index chart shows a weak head and shoulder reversal pattern.  Its weak because the left shoulder is a consolidation rather than a clear change in trend.  The right shoulder is well defined with a clear change in short term trend.

However, we can apply, with caution, a head and shoulder projection analysis to the dollar Index.  This sets a downside target near $0.95. This is the first level where traders will watch for a consolidation and rebound pattern to develop. This level is above support near $0.93 but a rebound from $0.95 is consistent with the way the dollar index oscillates around the central midpoint of $0.97.

The dollar Index is now a more volatile market with less sustainable trend development. It’s a trader’s market.

Traders prepare this oscillation behaviour where the value rallies and falls, but does not test the upper or lower edges of the trading band.We use the ANTSSYS trade and analysis method to identify the opportunities as these oscillations develop.

 

 

SUBJECT SUMMARY

INDEX NOTES

Each week we carry index analysis notes for regional markets. These are the markets in Singapore, Malaysia, Hong Kong, Shanghai, Thailand, Taiwan and Korea. Each market is covered once every six weeks or more often if there are significant market developments. The objective of the notes is to provide an analytical, technical background to assist readers in making better trading and investment decisions.


About the Author
Daryl Guppy (Australia)
Known as the “CNBC Chartman”, Technical Analysis Expert, International Investment Master, Daryl is an active private position trader trading equities and associated derivatives markets.

Daryl Guppy is Founder and Director of Guppytraders.com Pty Ltd. He is an active private position trader trading equities and associated derivatives markets. His most recent book is ‘The 36 Strategies of the Chinese for Financial Traders’. He is the author of several books including ‘Share Trading’, ‘Trading Tactics’, ‘Bear Trading’, ‘Chart Trading’, ‘Trading Asian Shares’, ‘Market Trading Tactics’, ‘Better Trading’, ‘Better Stock Trading’, ‘Snapshot Trading’. Several of these books are also available in Chinese & Italian, in particular, ‘Trend Trading’ has become a best seller and is available in Chinese.

Daryl developed the Guppy Multiple Moving Average indicator which is included in DZHI Advisor, Metastock, OmniTrader and other charting programs. He delivers accredited courses for the Singapore Exchange and Society of Remisiers, Singapore. He is an appointed foundation member of the Australian Government Shareholders and Investors Advisory Council. He is a regular technical analyst commentator and guest host on CNBC Asia Squawk Box.

As a technical trader, he relies mainly on chart and live market information to make trading decisions. He is the publisher of a weekly Internet newsletter Tutorials in Applied Technical Analysis, which explains technical analysis techniques and shows how they are applied to current markets. There are Australian, Asia, China and India editions of the newsletter, with each concentrating on local market solutions and trading education.

He is a regular contributor to the Sydney Futures Exchange magazine - Your Trading Edge, the US trading magazines - Technical Analysis of Stocks and Commodities, Active Trader, Working Money, Bridge Trader, Australia's Shares and Personal Investment magazines, Singapore's Smart Investor magazine and The Edge business weekly and Personal Money in Malaysia. He has a regular column in China's Weekly on Stocks magazine and in Shanghai Securities News. He also contributes to Poland's Professional Investor and provided sector analysis on the Singapore, Hong Kong, Malaysia and Philippines markets for i-invest handbooks.

He edited and contributed new material to the Australian editions of the US classics in the International Investors Bookshelf series, The Basics of Speculating and Day Trader's Advantage and Options: Trading Strategies That Work and Trading Rules and Mastering Technical Analysis. He prepared the introduction to the Australian editions of Breaking the Black Box (M Pring), A Technician's Guide to Day Trading (M Pring) and New Thinking in Technical Analysis (R Bensignor).

He provides web content to Sanford online brokerage, Reuters, On Line Trading systems, the Society of Remisiers, Singapore, Asiastockwatch, Telstra Big Pond Money and Quicken, Singapore. He provides charting chat room support and is co-host for the stockmeetingplace traders forum.

He trades from Darwin in the Northern Territory, of Australia, some 3,000kms from the nearest Exchange. As a result he makes full use of electronic advantages to actively trade the market and to keep in contact with other Australian and overseas traders.

He gives conference briefings for brokerage private clients. He is a featured speaker at the Australian Traders Expo, for the Sydney Futures Exchange Conference days around Australia and New Zealand, and at the Australian Technical Analysts Association annual national conferences. He was one of the speakers in the first Australian Equis Metastock seminar series. He also spoke at the On Line Trading Summit in San Diego which was webcast to traders throughout the world, and at the Technical Analysis Trading Forum in Orlando. He has spoken at trading conferences in Italy and France. He has also spoken frequently at all the major Australian Stock Exchanges, and for brokerage firms.

He was one of two foreigners (Jim Rogers and Daryl Guppy) to participate in the 2005 Chinese market outlook conference in Beijing which was broadcast throughout China. He is a keynote speaker at the 2007 China Capital Markets Investment Forum. His analysis has been presented at the 2005 Palm Oil Outlook conference sponsored by Bursa Malaysia and the BYSD Annual conference in Turkey. He is a regular speaker at the annual ASEAN Rubber Conference and at financial trading seminars in Shanghai, Beijing and Shenzhen.

He presents Certified Professional Training modules for charting and advanced technical analysis for the Singapore Stock Exchange and the Society of Remisiers, Singapore and the Hong Kong Securities Institute. He has worked with the Singapore and Australian Stock Exchanges to promote their cross trading link. He worked with Reuters Hong Kong to deliver trading and training workshops. He was the lecturer for the Casuarina Senior College charting course.

He also runs public trading workshops, and equity and futures brokerage sponsored seminars for clients such as National On Line trading, CMC Markets, Beijing SEEC in Australia, Kuala Lumpur, Singapore, Shanghai, Dalian and Paris. He provides in-house training support for fund managers, brokerage dealers and remisiers.

He presented several on-line workshop conferences for Pristine.com and Compuserve Investors Forum. He has appears regularly on CNBC Asia, Squawk Box as guest host technical analyst, Asian Wall Street Journal, Trading Day, Channel News Asia and ABC radio and television.

He was retained as a consultant by several Australian and Singaporean brokerages and financial portals to advise on the development of Internet based brokerage, trading and information services. He is a member of the Australian Technical Analysts Association, the Technical Analysts Society of Singapore and the International Federation of Technical Analysts.


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