The US Dollar has had a rocky road of late, and has been an investment choice for thrill seekers only. After a long period of moving sideways in a channel roughly between 93 and 100 it strengthened into the election last fall, and continued to move higher afterward. It broke the channel and pushed to new highs at the end of the year.
But then it was over. The strong move higher ended as the calendar turned, and the Dollar Index continued lower. It did so in a falling wedge pattern at first, until breaking that to the downside. It settled as it touched a 61.8% retracement of the prior move to the top and then in late June dropped again. After a small bounce to retest that 61.8% retracement level it fell hard to the bottom of the long term range.
That brings us to today. The Dollar Index has been sitting at that support level, and a 88.6% retracement of the full move higher, since the beginning of August. Nearly a full month of clinging to the edge of a cliff. Momentum is diverging to the upside, so maybe this pause is just to gain energy for a move higher. It would be a great place for that to happen. And the Bollinger Bands® are squeezing in, often a precursor to a move. Time to focus on a much narrower range, from 92.50 to 94. Follow it out of that range, whichever way it moves.
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