Fitch downgraded its sovereign rating for the US to AA+ but the dollar is shrugging off the unexpected Fitch downgrade. Every talking head on TV and other media outlets have weighed in on this development.
Let's go back to our charts and indicators.
In this daily bar chart of the dollar index (DXY), below, I can see a bearish picture. Prices have been weak since late September. The DXY trades below the declining 200-day moving average line. We have no trading volume from this over-the-counter market. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line.
In this weekly Japanese candlestick chart of the DXY, below, I can see that prices trade below the declining 40-week moving average line. The weekly MACD oscillator is bearish. The four most recent weeks of candles could be a declining three methods pattern. This is one of just a few continuation patterns that are described in books on candles. A bearish candle this week is what is needed to complete this pattern.
In this monthly candlestick chart of the DXY, below, I can see that candles can work on monthly charts. Notice the three months of upper shadows on the candles in late 2022 as the Dollar Index made a major top reversal. There is a lower shadow in May but the momentum has not yet turned positive.
In this daily Point and Figure chart of the $USD, below, I can see a potential downside price target in the $88 area.
In this weekly Point and Figure chart of the $USD, below, I can see a price target in the $88 area.
Bottom line strategy: Bad actors have been avoiding the U.S. Dollar for a long time and this latest news about a downgrade will only give a bigger audience a reason to move away from the greenback.
