Is US Dollar still heading up with more rate hike for 2018?
The USD Federal Reserve (Fed) has hinted strongly on 4 rate hike in 2018. Currently, the US Fed has already hike rate twice in year 2018. 10 year bond yield is pretty muted for now, staying at below 3% (now at 2.85%).
In this article, I like to discuss strength of US Dollar from Dollar Index chart and highlight few trading opportunities.
What is Dollar Index (DXY)?
There’s an article which my colleague wrote on Dollar Index. This article shows how you could get DXY charts and how to make comparison with currencies pairs.
DXY or Dollar Index measures against major currencies like EUR. It shows an indication on US Dollar strength.
Dollar Index (DXY)
In a chart, we look for strength or weakness.
For DXY, price is coming to a previous high – that’s a resistance.
At resistance, if price isn’t moving much higher (and it’s moving sideway), this could be a sign of weakness. It simply means that bulls aren’t too enthusiastic. Come to think of it, if US Fed says that they are going to hike more in year 2018, and if US bulls are not too bullish, it says a lot on US dollar strength.
Divergence is the key.
Here I spot for first indication of weakness.
Top indicator for me will be MACD divergence.
As you can see from US Dollar DXY chart, price is going sideway, while MACD is trending lower. That’s a strong hint of bearish divergence.
First currency pair to note – AUDUSD
Price is parked at strong support – that’s an equidistance channel low.
From divergence indicator, we could see hint of bullish classical divergence. (Have you downloaded my free MT4 divergence indicator?)
The Alien Wash indicator gave first sign of bullishness
I started to notice the slight bullishness from The Alien Wash indicator last week. On 3 July 2018, I wrote a post on AUDUSD in The Alien Room G+ suggesting this bullish sign.
Now, there’s more confirmation that AUDUSD is strengthening on a strong support.
It’s about going down to lower timeframe and executing a trade for high reward and risk ratio.
Let’s look at the next pair to note – USDCAD. But from here onwards, you will require The Alien Room access to my thoughts on USDCAD.