USD Index : Going Nowhere Fast

• At various times, this had look to be a very promising bull trade. Weak price action has since made the chart evolve into a damp squib. Non-trending range market (unlike some USD/EM).
• Reminder to self : Avoid FX trading here until chart outlook becomes clearer. There is nothing to go for here now.

USDX : Chart Update

• Monthly : 2nd attempt to hold above resistance line, looks like will be successful after a false break in March and re-entry in April. Bullish to 88.80.
• Weekly : Above previous high of 84.25 now. Some fierce follow through would be nice. Failure to hold above will likely lead to a squeeze on bulls.
• Trade : For now, have to assume it's bullish. Next release of US NFP probably will make or break this assumption. The potential SHS top in EUR/USD has a large say in how this will turn out (same trade, really).

Ponder Ponder

• 1. US 10 year yields up from 1.60% to 1.96% now.
• 2. USDX trying to take out 2012 highs.
• 3. S&P500 at new high.
• 1+2+3 => Pricing for US recovery (without inflation). Don't fight the tape, even if I think the central banks are doing the wrong thing and it will all come crashing down hard eventually. DO NOT TRY TO SHORT S&P. Accept it.
• Recovery = Time to buy back balance of Copper short (still in the money). Trade : Bought HGN3 +325.70. Square now.
• Free up room for taking more risk in Gold and Cable; both charts look good. (Enough long USD/JPY already. In fact, am in risk excess at 35% vs limit 25%).

USDX : Near the Brink

• Recent strength in USD is more than just Risk On/Off. From safe haven status, the USD is now the embodiment of the Growth trade. [This USD rally is not Risk Off because equities are firmer, interest rates higher].
• New dynamic : QEQ(ueue) .. or where a currency is in the QE cycle. From Fedspeak, the market is now convinced the US will be the first to end QE, even if that end may be indeterminate quarters away. Japan and UK has more QE to go, Euroland has Italy's rejection of austerity to contend with, Canada just backed off a tightening bias. So US is way out at the front of the QE exit Q by itself = unequivocally strong USD.
• Monthly : Overhead resistance at 82.80 vs current level of 82.54. Getting very close to fun and games time. 
• Trade : Have had on the long USD trade for some time now but just reduced to about half of peak risk last night given the very profitable fine run to near resistance and event risks ahead. Waiting for a break of 82.80 to get me major bullish USD and back to max long again.
• PS : I am about $20 away from shorting gold on above premises. A close below $1564 does it for me.

USDX : SHS How do I love thee? Let me count the ways

• Yet another look at recent recurring theme here - SHS top/bottom on Risk proxies. Nothing new really. Today it's the USD Index. Same idea, slightly different perspective.
• The charts are telling us that something big and really bad is going to happen in the coming months. Could be the EZ, or something else unexpected.
• What's missing still is the S&P500 chart to turn unequivocally bearish. We wait patiently for that.

USDX : Still Healthy

• Made a low of 81.96 yesterday pre-Bernanke disappointing QE3 hopes, from where we have bounced strongly. Now back up trading at 82.68.
• Upside breakout point = 82.06 still holding.
• As long as we hold above 82.06 on weekly closing basis, Risk Off is still the favored trading stance. The Risk On rally of the last few days = just a shakeout of weak Risk Off hands.
• Trimmed 50% of risk (took off short S&P) but re-established some last night via short Corn. Up to 80% exposure now.
• P&L now = small down on month, by roughly what would have been the amount of USD/JPY P had I not foolishly lifted the hedge.

USDX : Phase 2 of Upside Break

• 2 weeks ago, USDX broke a downtrend resistance line at 80.68.
• Currently at 82.31 = Testing a SHS bottom neckline at 82.06. When break is confirmed, the upside on USD is massive. As I said before, game changer. Show hand time, NOW !

USD Index : Breaking Resistance

• Weekly chart of USD Index front month continuation contract (now at 80.77).
• Topside resistance formed by line joining Jun10 and Jan12 highs is at 80.68.
• Game changer in the making. Hang on to those Risk Off positions. Manage risk so as not to get stopped out on volatility ie don't get greedy!

USDX : BUY

• Chart with labels self-explanatory. In short - go with sudden sharp monthly reversals (such as we are seeing now).
• We are now only at the beginning of a multi-month USD upmove. Risk Off.
• Suggests that it is not the time to buy stocks (or gold) yet, no matter how cheap they might look. Judge value by where it is going, not where it has come from.

USDX : Changing Outlook

• As suspected for some time already, big underlying change taking place in USDX.
• Monthly : Difficult to find a trade here due to large zig-zag and overlaps.
• Weekly : One of my favorite formation. Long consolidation band followed by a periscope-like pop up.
• Daily : As per weekly periscope. Yesterday's pullback to 75.41 was the perfect buy signal. Missed it. Damn!

USDX : Comeback Plan

• Light on risk now after recent Type 1 debacle from wrong sizing.
• Comeback plan presented here using USDX as overall proxy.
• Monthly : Big triangle break on downside; pattern not at all complete, nor does it look like a reversal has taken place. So, still looking for test of 70.70 eventually.
• Weekly : Downtrend in place. Smaller triangle forming; boundaries at 73.83 and 75.83.
• Daily : Magnified view of weekly triangle. Expect choppy price action within.
• Trade : Stand clear until break occurs. Of course, a downside break (=trend continuation) is much preferred, being in line with my mental orientation. I would be lost on an upside break. Need to prepare myself psychologically to go long if necessary.

USDX : Short at 75.41

• Still sticking with long term lower USD view.
• Monthly : More likely down than up. Short term rally over-run its course.
• Weekly : Currently trading back below 75. 63. A potential negative, awaiting confirmation.
• Daily : 1st incidence of 2 consecutive black candles = 1st indication of weakness during this bear squeeze. Reversal price action on the day.
• Trade : Sold at 75.41 at close of day.

USDX : Being Stubborn ?

• Quite lost here. 
• [Trading at 75.29 now].
• Preliminary thoughts on USDX, which basically represents the entire risk complex. Net net - still a sell, I think.
• Monthly : After the sharp squeeze, hard to see this rallying a lot further from here without having to overcome a lot of strong overhead resistance. Path of least resistance from here = down.
• Weekly : Need this week to end with a black candle below 75.63 to call an end to retracement rally. Early days yet. But hopeful.
• Daily : Possible weakness developing today

USDX : Crossroads

• Horrible horrible trading day yesterday with both core and hedge all wrong.
• The USDX is back near to critical level of 74.17. Whether recent trends continue (ie USD down, commodities up) or bigger reversal occurs will be indicated by reaction from here.
• Monthly and weekly charts still indicate downtrend.
• Daily chart strong reversal. Remains to be seen if this can cascade up to change the outlook for the higher time frames.

USDX : Newton's 1st Law

• A dollar in decline shall remain so unless acted upon by an unbalanced external force.
• Possible external force = Fed rate hikes but Bernanke just said no chance (yet). Other possibilities eg a flight to quality black swan event. But Japan nuclear disaster disproved that. USD no longer regarded as safe haven. What else can rescue the USD? Not much.
• Month end today. Triangle downside break almost certainly confirmed. Would take a miracle rally of large magnitude to rescue the USD (by NY close tonight) and negate the almost confirmed chart sell signal now. This will be 2nd consecutive monthly close below the triangle line (at 76.26). 57 here we come.

USDX : Long Term Triangle Break

• Trading at 73.81 now, below important previous support (2009 bottom) of 74.17.
• Very long term chart attached - quarterly going back to 1982. Price action of past 2-3 years in the form of a triangle which has broken down. Triangle objective is at 57.00 which is too difficult to envisage at this moment in time. (But not impossible given bad US policies eg deficits, unchanged TBTF, Fed taking risks with inflation, etc. Markets punish other countries for poor governance, why not the US? [eg GDP 3%, CPI 2.7% and FF at 0%? WTF?].
• For now, look for Mar08 low of 70.70 to be tested. Before that, on the monthly chart, there is previous congestion between 72-73 so this might hold for a bit. Will not be a 1-way street down. But down it is.

USDX : Still There

• Big squeeze (Finland vote) of past 2 days to high of 75.81 probably taken out a lot of weak bears along the way. Now trading at 75.22.
• Key chart point on monthly and weekly chart is 75.63. As long as we do not close the respective time frame above this, bear trend is intact. Given how lopsided the market has been for a while now, this latest squeeze perhaps was inevitable (easy to say in hindsight).
• Pop >75.63 and now <75.63 = failed failure = continuation ?

Chart of the Week : USD Index

74.17 must hold or else ...

USDX : Getting More Bearish

• Monthly : Mar11 close at 75.98 confirmed the downside break of the huge triangle. The bottom edge is formed by a trendline of 4 points so it is fairly significant. Projecting from the triangle, the downside is too scary to contemplate, so for now, restrict strategy planning based on preliminary target of 74.17.
• In spite of all the recent Fed rhetoric (Plosser, Lacker, Kocherlakota), the reality of it is ... the ECB will hike next week (and again) before the Fed finally acts, if at all this year.
• Price action tonight very damaging to bulls. Post- better than expected NFP+lower UR, USDX high 76.61, reversed to trade down at 75.81 (below yesterday's close even) now.

USDX : Big Picture Triangle Break

• Price action since Mar08 has resulted in a triangle which is now breaking on the downside at 76.22.
• Triangle widest point in Mar09, top 89.62, bottom 72.53 so downmove measured objective has a length of 17.09.
• Set against the break point at 76.22, triangle downside objective is 59.13.
• Plenty to play for here still, even though USDX feels like it has been going down forever. Technically, the sell trade is just beginning a fresh leg. Hang tight to your gold.