The U.S. Dollar Index (DXY) is getting a lot of media attention on Friday as traders seem to be reacting to recent comments by President Trump. As I looked at a few of the charts this morning it looks like the greenback could weaken further from here.
Let's take a look.
In this daily bar chart of the DXY, below, we can see a pattern of weakening indicators since early May. Prices rallied from late April to this month with prices above the rising 50-day moving average line.
This month we can see a number of dips to the average line and the next dip looks like it could break this indicator. Notice the weakening pattern of price momentum from early May to late June to now? When this indicator pattern is compared to the higher highs in price we have a bearish divergence which could be foreshadowing a correction.
The Moving Average Convergence Divergence (MACD) oscillator crossed to the downside at the end of May/beginning of June for a take profits sell signal. This indicator is only slightly above the zero line and crossing below the line would be a sell signal.
In this daily candlestick chart of the DXY, below, we can see upper shadows on the candles for Wednesday and Thursday showing that traders rejected the highs. Thursday's candle is bearish and Friday's price action looks like it will be a "confirmation day".
In this weekly bar chart of DXY, below, we see a mixed pattern right now. Prices are above the flat 40-week moving average line and a big decline is needed to break the average line.
The 12-week price momentum study shows that momentum has peaked and is weakening. The weekly MACD oscillator is narrowing towards a weekly take profits sell signal.
Bottom line: It looks like the charts of the DXY were putting in a high before today's comments by President Trump. Interesting.