In one of my posts last week where I considered the longer term chart for the US dollar index, I referred to the chart as a picture that painted a thousand words The analysis anticipated a stronger move higher, given the formation of the rising triangle chart pattern on the weekly chart. This is one of the classic price patterns, and one that occurs in all timeframes, and across all markets. The analysis is very simple, in that the series of higher lows to the underside of the price action, are sending a strong signal the market remains bullish, since each test lower is at a higher level than previously, with the market creating the classic flat top as the price action narrows, with the rising price action squeezing ever closer to the ceiling of resistance. When such patterns occur it is simply a question of being patient and waiting for any breakaway to be confirmed, and for the dollar index, it was Friday’s non farm payroll data which duly provided the catalyst, with the index taking out two key levels as a result.
First, the ceiling of the rising triangle was breached in the 12,100 area, and second, the resistance level at 12,150 created in March and April with sharp reversals lower, was also taken out on Friday with the index closing 12,210.63, well above both levels. In early trading today, the US dollar has given back some of the gains, but given the longer term technical picture on the weekly chart the index remains firmly bullish with a very strong platform of support now in place below. For Janet and the FED, whilst one swallow does not a summer make, no doubt they will be heartily relieved to have been given a face saving lifeline on which to hang their hat of a rate rise in December. Collective sighs of relief all around!
By Anna Coulling
Charts from NinjaTrader and USD index indicator from Quantum Trading