The U.S. Dollar Index, DX #F, has been declining since January 2017 when it reached the highest level since 2003 (Chart 1).
During 1990s, the index has risen from a low of 78.43, in 1992, to a high of121.90 in 2001. The up trend reversal occurred after a near triple bottom pattern – two other lows occurred in 1991 (80.60) and in 1995 (80.14). The top in 2001 also made a near double top pattern, the other high was in 2002 of 120.80.
After 2002 the dollar declined to 71.205 by 2008. It nearly tested that low in 2009 by reaching a low 74.21 in 2009 and then 73.015 in April 2011. It then made a reversal. Between 2008 and 2014, the index formed a symmetrical triangle pattern with a high of 89.71 and a low of 71.05. The breakout was near 86.05 level, giving us a target near 104.71.
The 61.8% Fibonacci retracement level of the 2003-to-2008 decline is 102.098. The high point reached in January 2017 is 103.815. Also, on monthly chart, the MACD is showing a divergence in January. The price made a high but the MACD did not. All of this chart patterns and technical indicators point to at least a consolidation if not the trend reversal.
Weekly and Daily Timeframe
The weekly chart of the Dollar Index gives us more information (Chart 2). From January 2015 to November 2016, the Dollar index traded within horizontal channel that was bounded between 100.785 and 92.52. For most of the 2015 the market was expecting a Fed Funds Rate hike, which was keeping an upward pressure on the dollar. However the expectation of rate hike was not sufficient for the index to over come the psychological resistance of 100.
The initial rally stopped March 2015. In August index touched the low of 92.52 before getting another upwind. Despite getting the expected first rate hike in December, the index again could not over the resistance. It finally broke through the resistance in the wake of U.S. presidential election and on the eve of next Fed Funds rate hike in November 2016. The break to the upside did not last long and by the first week on 2017, the index had started on it move down.
In January 2017, the 14-week RSI made a divergence – index made a high but the RSI did not. In late January, RSI broke below an uptrend line from the low of April 2016. The index followed through in early May and broke below its uptrend line during the same period. The RSI is below an downtrend line since December 2016. Usually a trend line on RSI breaks before price (but not always). This indicates that the weakness on dollar is going to last.
The daily chart (Chart 3) corroborate the weekly chart analysis. It also shows the next support level near 95.90 level. The next support levels are near 94.00, the August 2016 low and 91.88, the May 2016 low. On May 23 , the Dollar index closed at 97.264 first support is 1.364 points or 1.4% away.
EUR / USD
On weekly time frame (Chart 4), EUR/USD is making a down sloping flag, which is usually a bullish pattern. Euro made a low of 1.04590 in mid-March 2015. It later breached that low and made another low of 1.03524 in mid-December 2016. Since then it is making higher highs and higher lows. It has moved above 89-week SMA. The next resistance is near 1.16163, the May 2016 high and then 1.17140, the August 2015 high.
On Daily timeframe (Chart 5), the Euro made an ascending between November 216 and April 2017. In late-April it broke above the triangle before testing the break in early May. Since then it has broken to the upside.
The height of the ascending triangle is nearly 533 PIPs. The break out is near 1.08736. The 100% extension target of the pattern is near 1.14070 and the 161.8% extension target is near 1.17365. On May 23, EUR/USD closed at 1.1837. First target is 430 PIPs away.
GBP / USD
Following June 2016 Brexit referendum, British Pound broke through multi-year lows. It extended that decline in October and made a low of 1.1950 against the U.S. dollar, its lowest level since May 1985. The weekly chart of GBP/USD shows that the low of July, 1.2798, acted as a resistance till April 2017 (Chart 6).
On Daily time frame (Chart 7), GBP / USD formed a symmetrical triangle from October 2016 to April 2017 The high point of the pattern is 1.2775 and the low point is 1.1950, giving us a height of 825 PIPs. The break above the pattern occurred near 1.26390 on April 18. The 100% extension target of the pattern is near 1.3450 and the 161.8% extension target is near 1.39750 level.
The next resistance is near 1.3445, the high of September 2016. The resistance following that is near 1.3836, the low of February 2016. On May 23, GBP/USD closed at 1.29620. The first target is nearly 800 PIPs away.
USD / JPY
In October 2011, USD / JPY made all time low of 75.575 (Yen was strongest against U.S. dollar) and then started an uptrend that lasted till June 2015 and topped at 125.856 (Chart 8). That level was near the June 2007 high of 124.150. Yen then moved sideways till January 2016 before declining to 99.003 by June 2016. This was near the 50% retracement of the rally and within the congestion zone created in the second quarter of 2014.
The bounce from June 2016 low took the currency pair to 118.665, which was within the support zone turned resistance zone created by the lows of August 2015 and December 2014.
USD / JPY made a double top at 118.665 in December 2016 (Chart 9). Since then it has retraced close to the 61.8% Fibonacci level making a down-sloping flag. Such patterns are usually bullish and a break above 112.50 will complete the pattern. The rally from June 2016 low to December 2016 high was 1966 PIPs. The low point of the flag is near 108.133, giving us a 61.8% extension target near 120.28 and 100% extension target near 127.79. USD / JPY closed at 111.804 on May 23, which 848 PIPs away from first target.
USD / CAD
In November 2007, the Canadian dollar was at the strongest level against U.S. dollar when USD/CAD made a low of 0.90590. After a bounce up to1.219030, the pair made another low of 0.94070 in July 2011. After that it rallied to 1.46899 by January 2016, its highest level since April 2003.
Following that high, USD/CAD declined to 1.24610 by May 2016, retracing nearly 38.2% of the rally from 2011 lows (Chart 10). Since then the pair has been gradually rising within an up-sloping flag, which is generally bearish in nature. A break below 1.32625, the April 2017 low will complete the pattern. The height of the flag-pole or the decline is near 2200 PIPs. The 61.8% extension target is near 1.12400 and the 100% extension target is near 1.15400.
On Daily time-frame, the USD/CAD is trading within a horizontal trading channel since last-September 2016. The upper limit is near 1,.3600 and the lower limit is near 1.29600. In late-April 2017, the pair broke above the channel only to fall back within it in mid-May. The next support is at 1.32235, the low of April 13 and is 290 PIPs away from May 23 close of 1.35135.
AUD / USD
Just before the 2008 financial crisis, AUD/USD made a low of 0.60090 in October 2008 (Chart 12). It then started a rally that took the pair to 1.10802 by July 2011, its highest level since January 1982.
Between June 2011 and April 2013, AUD/USD made a symmetrical triangle, which it broke in May 2013. The high of the triangle is 1.10802 and the low is 0.98619. The break out is near 0.98400, giving us a 161.8% extension target near 0.71000. In January 2016, AUD/USD made a low of 0.68274.
On Weekly time-frame (Chart 13), AUD/USD is making another symmetrical triangle. At the ,moment it in the middle of the pattern. Upside break would be above 0.77500 and the down side break would be below 0.7300.
The daily chart shows that AUD/USD (Chart 14) is trading within a horizontal channel since April 2016. The upper limit is near 0.77500 and the lower limit is near 0.71450. At present the pair is near the middle of this channel.
Since March 21 2017, AUD/USD is below a down trend line. After making a low of 0.73288 on May 9, the pair has bounced back up to the down-trend line and is attempting to break above. A move above 0.75173 will complete the break. The upper limit of the patterns is nearly 300 PIPs away from May 23 close of 0.74770.
USD / INR
From November 2011 low of 39.01, USD / INR rose to a high of 69.22 during the 2013 ‘taper-tantrum’. The April then declined to 58.2630 by May 2014, before advancing to test the highs in February 2016 (Chart 15). It made another unsuccessful attempt in November 2016.
Between December 2015 and March 2017, USD / INR trade within a horizontal channel with an upper limit near 68.7850 and a lower limit near 66.210 (Chart 16). On March 13, USD / INR broke below the channel. The 100% extension target is near 63.63 and the 161.8% extension target is near 62.05. On April 24, the pair a low of 63.93.
On May 24 USD / INR closed at 64.52. The next resistance is near 66.21 and the support61.33. near.