I’ve traded commodities, stocks, options, bonds, cryptocurrency, and forex over the last 13 years.
I can trade so many markets at once because I rely primarily on technical analysis.
Technical analysis helps me identify shifts in market psychology and sentiment using a price chart.
And it offers traders a tremendous advantage when predicting the market’s next move. (I wrote about that here earlier this month.)
Instead of having to do research on the fundamentals of just one market, all I do is look at a price chart.
My approach is the same no matter which market I look at.
That’s because all markets go through the same shifts in sentiment – always moving between the two extremes of fear and greed.
And there’s one valuable lesson I’ve learned after looking at tens of thousands of charts…
Markets can have their own unique personalities.
For example, the trading patterns in crude oil are very different from the ones in Apple, even though the same concepts of technical analysis apply to both markets.
Today, we’ll be looking at a fascinating pattern I’ve identified in the U.S. dollar.
Whenever the dollar makes a significant change in direction, it almost always takes place around the new year.
Check out the U.S. Dollar Index (DXY) chart below…
I’ve highlighted all the major turning points in the fortunes of the dollar going back to 2000.
Since then, there’s a common thread connecting almost every major top and bottom in the dollar’s trading history.
Specifically, I’ve identified a window that stretches between November and March when the dollar tends to stage dramatic reversals that last for a year or longer… putting in either a top or a bottom.
The most recent example I’ve found is when the dollar bottomed out in January 2021. Since then, the dollar has gone on to surge over 22.5%.
The strength we’ve seen over the last two years is quite impressive by any historical standard.
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In fact, the last time the dollar surged this strongly was between early 2014 and December 2016… gaining about 28.5%.
The dollar then topped out heading into 2017 and declined nearly 13% by February 2018.
Tomorrow is September, so we’re quickly approaching the beginning of the window. Because of its extended level – and the window coming up fast – the dollar could be primed for a reversal lower.
So, I’ll be on high alert for a technical chart pattern that could signal a reversal is in the cards for 2023.
Some of my favorite reversal patterns include the rising wedge and the iconic head and shoulders pattern.
If I spot one of those chart patterns within this special window, then I’ll be sure to let you know.
Buying the dollar was one of the best trades of last year.
And it’s possible that selling the dollar will be equally profitable in 2023.
Happy trading,
Imre Gams
Analyst, Market Minute
Reader Mailbag
What are your thoughts on the dollar’s next move?
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