FOREX Chart Of The Day: USD Seasonal Patterns Explained
Hi, and welcome to this Blueberry Markets Video update with me, John Kibbler, Head Currency Analyst.
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In this video, we’re going to take a look at the US Dollar index, and we’re going to break down whether we think the US Dollar is going to break or bounce from this key level, through here.
Looking at the chart in general, and the market’s overall trend, it seems more likely that we will break and move to the downside because we see this nice trend to the downside. We’ve got nice lower lows, lower highs being formed as the market continues to push to the downside. But one thing we’ve got to consider is the seasonality in the market.
Let’s take a look at that one second – grab the seasonal chart – we can see, here, on the seasonal chart, we’ve got this move that typically happens through July where the US Dollar does move lower and then finds a little bit of a bottom towards the end of July until the start of August. It is replicating what’s happening now. We’ve got this nice move to the downside throughout July, and the price is now hitting a key support level.
What we could anticipate happening here is that next week or so, the market might consolidate or maybe even break out of the zone and give us a false breakout, and then look to rally in line with what typically happens in August.
Usually, in August, we get that rally. It tops out in September, drops and even bottoms throughout September where we get a huge rally in the US Dollar price, and this is a 20-year range ended in 2019. So, it’s a pretty up-to-date seasonal chart for the US Dollar index. We know that the information is relatively good.
At the moment, the US Dollar is still very bearish. The only thing I would say is you would only want to be bearish of the US Dollar in the short term. Not really in the long term because we are approaching this huge low and the last time the market came here, we had a huge, huge rally out of the US Dollar. So, what I would expect is maybe for the market to break through that low, retest, and then push to the upside.
But what I’ll be waiting for is some daily closes to start repurchasing the US Dollar. So, I always believe in looking for that change in simplicity, and one way we could look for that is to look for the early change, unlock the four-hour timeframe or wait for the daily change in cycles. If the market starts producing daily bullish rejections here, then I would start looking for a potential upside to the US Dollar.
If I grab the four-hour timeframe, what that would look like on a four-hour timeframe is maybe a double bottom pattern or some inverse head and shoulders pattern. Anything in here suggests the market’s starting to push back to the upside; we’ve been in that nice four-hour downtrend for a while now. So, I would start to anticipate a little bit of a move to the upside.
If I jump on this weekly timeframe, we’re going oversold. And the daily timeframe is oversold on the RSI – pointing to a market that could be running out of steam; but remember, the price action will be the first thing that we look at. What will those daily closes suggest to us if we do start getting those? Like I said, daily bullish candlesticks from here, that’ll be the first sign that buyers are stepping back into the market and will give us a reason to start getting involved again.
Keep an eye on the US Dollar. The seasonal pattern does suggest that we start looking for a little bit of an upside to the market. Keep this key zone marked out on your charts. If the price does break below and close below, I imagine we might even get a close below, which might pull a few people in, and then maybe a false breakout; maybe, a reversal signal at that point, through here, something like that could allow us to buy.
So keep an eye on this, maybe in the short term, be a US Dollar seller. But on the long-term, consider the reversal setup.
I hope you enjoyed this video update. If you did, please like it, and I’ll see you in the next video.
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