Extracted From the Oct 19, 2014 Market Update
Bottom line when the world starts to sing “Kumbaya” in regards to the USA, a very important top will have been reached. This entire recovery is all smoke and mirrors, but we are not going to argue with it. The trend is up and that is all that matters. By the way the trend is also bullish on the monthly charts, so this rally has pretty strong legs. As long as the trend is up, the dollar should be in a position to test 88.00 and if the trend is still strong when 88.00 is hit, then it could easily trade well past 90.00. There is a long term down trend line on the monthly charts which ends in the 91.00-92.00 ranges. Thus this long term down trend line could represent the point where the rally ultimately ends, but as we have repeatedly stated, we will differ to the trend indicator for the final call. Market Update Sept 30, 2014
The pattern continues to show signs of strength both on the weekly and monthly time lines. The trend is also up on the both lines and so until the trend changes one can expect the dollar to put in higher highs. As it is rather overbought it would not surprise us if the dollar pulled back a bit. There is a strong layer of initial support in the 84.80-85.00 ranges. If it closes below this level for 24 hours or more, then it will most likely test the 82.90-83.30 ranges; if it were to pullback this much, it would make for a splendid buy.
There is always the chance for the dollar to overshoot during the correction process, so if it closes below 82.80 for more than 3 days in a row, it will most likely test the lower bands of support which fall in the 81.80-82.20 ranges. For the correction to pick up steam the green line would have to cross over the purple line in our custom MACD indicator. We have two custom MACDS the first one has standard deviation envelopes, the second one does not. Additionally the SD MACDS (MACDS with Standard deviation) would turn negative if the green dots turned red and moved below the lower SD band. At this point we would not focus on the lower price targets. Lastly, as long as the trend is positive every strong pullback should be treated as buying opportunity. Both versions of MACD are in bullish mode right now as is the case with our custom RSI indicator.
The trend (according to our trend Indicator) is still up and thus every pullback must be viewed as a buying opportunity; the stronger the pullback the greater the opportunity. Dollar Bull Still In Play