Dollar Divergence: Is Momentum Weakening?

Dollar Divergence: Will the Buck Take a Breather?

Bullion.Directory precious metals analysis 19 January, 2015
By Terry Kinder
Investor, Technical Analyst

King Dollar has had a strong move higher, climbing from $78.90 in May to over $92.00 as this is being written. However a divergence has developed that could signal the buck could take a breather.

Dollar Divergence: Is the dollar’s vertical climb going to take a time out?

The above chart shows a developing dollar divergence with the Commodity Channel Index (CCI). You can see, in the past, that when dollar divergence with the CCI has developed, it eventually resulted in the dollar moving lower.

Just as I was writing the above, DanV over at TradingView, posted a chart and some comments highlighting another dollar divergence here. It’s an interesting, short post well worth taking a look at.

Dollar Divergence: The technical indicators seem to be signalling the dollar uptrend is weakening a little.

The above chart appears to offer support for the dollar divergence with the Commodity Channel Index. MACD and RSI, while elevated, have turned down. The J (green line) of KDJ has turned lower. which along with other technical indicators, may indicate that the dollar price may back down a little.

Dollar Divergence: The divergence between the dollar and the CCI could signal a dollar move lower. Image:pixabay

Another important thing to keep an eye on for the dollar this week is whether or not it can finish the week above the 11-year old channel it just poked it’s head above last Friday, by one cent, finishing the week at $92.64.

If the dollar can’t move above the channel this week, it could indicate some weakening in the dollar’s climb up the Stairway to Heaven.

If you’re long the U.S. Dollar you may want to exercise caution here as the dollar divergence with the CCI could indicate the strong dollar uptrend is losing momentum.

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