E Still The Most Important Chart

Tonight I would like to show you some charts on several of the different currencies and especially the US dollar as it has been pretty weak lately. As you know the US dollar has been consolidating that massive impulse move up that began in the Spring of 2014 chopping sideways between roughly 100 at the top and 93 or so at the bottom. There is a weekly chart I built and posted just a couple of times during that big impulse move when the US dollar was about at the halfway point of that big move.

I doubt most of you will remember this chart but it showed a possible doubling of the lower channel. This weekly linear scale chart goes back seven years and shows a top in April of 2010 and a low in April of 2011, the highest and lowest black arrows. When I first built this chart the US dollar was trading inside the blue bullish rising wedge, which at the time I viewed as a halfway pattern to the upside. Once I made that connection and where the blue rising wedge was forming, I played around with the bottom trendline and moved it up to the July high, which gave me the lower parallel channel below the center dashed trendline. I’ve seen in the past when there is a well defined channel they can sometimes double forming a much bigger channel.

The two blue measuring sticks are the exact same height, which I then used to plot out a possible top rail for a doubling of the lower channel, using the two inside black arrows for a reference point. The blue bullish rising wedge was the key to even consider doubling the bottom channel. As you can see I had a price objective for the impulse move up to the 98 area which was the new top rail of the bigger uptrend channel. The US dollar actually made it up to 100, but it could go no further creating a second high last fall.

The reason I’m showing you this chart is because the US dollar could fall to the lower trendline around the 84 area and still be in an uptrend. That would dovetail with the strength in the PM complex giving that sector a chance for a strong rally while the US dollar corrects within it’s bull market. Commodities could also benefit from this correction in the US dollar and get a decent counter trend rally. If the US dollar does indeed decline to the bottom trendline that may setup a correction phase in the PM complex as the dollar resumes its bull market. We never know with 100% certainty how the markets will move but this makes sense to me from a Chartology perspective.