US Dollar Index at very important Cross-roads - Reaction to SPX
For those new to Forex this is the US Dollar Index. (DXY). It is a combination of six of some of the most traded world currencies. Euro (EUR), British pound (GBP), Canadian dollar (CAD), Japanese yen (JPY), Swedish krona (SEK), and Swiss franc (CHF).
The move down Friday is the largest single-day move since Dec 2020. Large moves like this almost always signal a turn to a long-time trend is at hand or coming very soon. What this means for FOREX traders is that currencies that are traded against the USD should also be putting in turns now or shortly. (next week or so). However with that said, it is counter-intuitive to see the devaluation of the USD in face of a market sell-off, as the opposite is the more common happening. Strengthening of the USD is usually the cause of equity market sell-offs as investors seek safety in the Dollar. So I'm cautiously bearish. (I also see on my Elliott Wave count (not shown) that a potential final thrust is somewhat anticipated).
But of course the most important indicator is "Price Action". So I watch for further evidence of breaks lower at this time!
This chart shows how I use multiple channels to determine where the most important lines of support and resistance are.
You can see where I have used the original channel to then make a clone (exact duplicate), to place above the original channel to indicate upcoming lines of resistance and support. Following this I also make secondary channels showing the acceleration of the move, as well as providing additional places of support and resistance.
Now although most trading platforms don't have access to trading the DXY, this view allows for looking for setups in currencies such as the EUR/USD, GBP/USD and USD/JPY etc. I will get around to posting some charts and analysis on these pairs later today.
The move down Friday is the largest single-day move since Dec 2020. Large moves like this almost always signal a turn to a long-time trend is at hand or coming very soon. What this means for FOREX traders is that currencies that are traded against the USD should also be putting in turns now or shortly. (next week or so). However with that said, it is counter-intuitive to see the devaluation of the USD in face of a market sell-off, as the opposite is the more common happening. Strengthening of the USD is usually the cause of equity market sell-offs as investors seek safety in the Dollar. So I'm cautiously bearish. (I also see on my Elliott Wave count (not shown) that a potential final thrust is somewhat anticipated).
But of course the most important indicator is "Price Action". So I watch for further evidence of breaks lower at this time!
This chart shows how I use multiple channels to determine where the most important lines of support and resistance are.
You can see where I have used the original channel to then make a clone (exact duplicate), to place above the original channel to indicate upcoming lines of resistance and support. Following this I also make secondary channels showing the acceleration of the move, as well as providing additional places of support and resistance.
Now although most trading platforms don't have access to trading the DXY, this view allows for looking for setups in currencies such as the EUR/USD, GBP/USD and USD/JPY etc. I will get around to posting some charts and analysis on these pairs later today.
