Can the Dollar Rally Continue?

February 13th, 2015
in contributors

by Erik McCurdy, Prometheus Market Insight

The following technical and cycle analyses provide short-term forecasts for the US dollar index. For intermediate-term outlooks see the latest intermediate-term forecast and for long-term outlooks see the latest long-term forecast.


Follow up:

Technical Analysis

The index closed sharply lower yesterday (Thursday 12 February 2015), retreating from previous highs of the uptrend from July. Technical indicators are effectively neutral overall, suggesting that direction is in question. The uptrend has become extremely overbought and it will be followed by a violent overbought correction.

Click for larger image.

Cycle Analysis

A cycle high signal was generated today, indicating that the alpha high (AH) likely formed on February 11. We are 1 session into the alpha phase decline of the cycle following the short-term cycle low (STCL) on February 5. A quick rebound followed by an extended beta phase rally that moves above the previous AH at 95.85 would reconfirm the current bullish translation and favor additional short-term strength. Alternatively, a move well below the last STCL at 93.68 during the alpha phase decline would signal the likely transition to a bearish translation. The window during which the next STCL is likely to occur is from March 4 to March 18, with our best estimate being in the March 9 to March 13 range.

  • Last STCL: February 5, 2015
  • Cycle Duration: 5 sessions
  • Cycle Translation: Bullish
  • Next STCL Window: March 4 to March 18; best estimate in the March 9 to March 13 range.
  • Setup Status: Cycle high setup occurred today.
  • Trigger Status: Cycle high trigger occurred today.
  • Signal Status: Cycle high signal was generated today.
  • Stop Level: None active.

Click for larger image.

Short-term Outlook

  • Bullish Scenario: A rebound and close above the previous short-term high at 95.51 would reconfirm the uptrend from July and forecast additional gains.
  • Bearish Scenario: A close well below the middle of the Bollinger bands at 94.31 would predict a return to the bottom of the Bollinger bands at 92.73.

The bearish scenario is slightly more likely (~60% probable).

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