Hi friends! Today, we're going to take a look at the state of the US dollar, via the UUP ETF. Let's get right to it! Looking at the weekly chart, you can see that since about mid 2014, the dollar has greenback has been forming a big head and shoulders pattern. It isn't the cleanest looking head and shoulders pattern, but it's a head and shoulders nonetheless. You can see that a breakdown below the neckline has already occurred, but the dollar has been desperately trying to get back above, only to print a bear flag in the process. Since the dollar has printed this series of bearish patterns, I think that further downside is very likely. Don't forget, though, that this is a weekly chart. So, each candle represents a full week of trading. A real breakdown could take weeks or even months to play out. This is a longer term analysis, on where the dollar may be heading in the third and fourth quarters of the year.
Taking a closer look at the bear flag, you can see that the 20 EMA (in blue) is beginning to cross through it, and price has already found it to be resistive. Therefore, the 20 EMA could be the technical catalyst that causes the bear flag to break to the downside. From here, we need to watch the performance of UUP at the 20 EMA, and wait for a break to the downside. There is some support around 23.14, but below there, UUP could accelerate to the 78.6% retrace, or even lower. There's actually a gap fill at 22.04, and the downside projection of the bear flag (black dashes) takes UUP directly to that level. With that said, if we do see a substantial breakdown of the dollar, the 22 handle would be my target. There is a small bullish divergence on the MACD, but given plethora of bearish patterns, it's fair to say that they trump the divergence.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***