By Andrew Nyquist
In December, I wrote about the possible US Dollar head and shoulders chart pattern in “flipping the switch.” In that piece, I included a chart that was right-side up, along with one that was upside down (for effect). This is a pretty cool trick, especially if you feel a bearish or bullish bias and need a reality check. Since that posting, the US Dollar index has continued sideways, caught in the right shoulder of the technical formation. But make no mistake, time is tracking, and the break lower or higher will likely be a violent one.
In the chart below, it’s easy to see the ominous (bearish) look of the US Dollar head and shoulders chart pattern. And although the formation is still in the “idea” phase, it is worth noting that the pattern will trigger on a sustained move below 78 with a target of 72-73. That said, investors still need to respect overhead resistance at 81.50 (the shoulders). A move above this level would be bullish and catch many bears off guard.
Either way, the chart pattern looks set for resolution by springtime. With stocks nearing all-time highs, and commodities gaining traction, investors in both asset classes would be wise to monitor this development. A break down in the dollar would be a tail wind for both, and vice versa. Stay tuned.
Trade safe, trade disciplined.
US Dollar Chart
US Dollar head and shoulders chart pattern highlighting key support and resistance levels.
No position in any of the mentioned securities at the time of publication.