US Dollar Index ($USD) and OIL Thru Charts

I apologize for the delay in making a post regarding the 'connection' between the buck and Oil. I am involved in another project that is taking much of my time.

People get very skeptical when s, making predictions about the many different assets. Well, I tend not to make predictions but rather will stick to what I see on my charts. Most of the time they tell me a VERY true story for a lo of things that are about to happen.

It might seem a little cartesian for most of you. But graphs and some imagination can help one a lot.

By looking at the Oil and the USDx charts I have good reason to believe that the buck will regain strength and it won't take very long. I dare to say that we might see it in a very different picture by the end of 2012 and early 2013.

Like mentioned in an earlier post, the buck and Oil are very negatively correlated.

When you put those two together, you have some of the pieces to put a puzzle together.

Well, lets look at the charts:

OIL

Oil monthly and weekly: It is early to say, but a very special formation could be in the works for these two time frames. A couple more months will give me some more indication that this is a potential formation I am 'projecting'. For now, all I can say is that I expect oil prices to drop for the following months until late 2012, early 2013.

Daily: A rather steep trend line with a MACD divergence pointing towards 80.30. Price is still heading up, but  by the steepness of this line with the added divergence I see it dropping sooner than later.

H4: Price action inside a wedge-like pattern. Most likely, will be a continuation pattern. Therefore expect the lower line to be taken out.

Therefore, in the mid-term prices have a limited potential to rise a bit more. However, they are entering exhaustion mode.

USDx


Monthly and Weekly charts: Price inside a possible wedge or a triangle pattern. Which ever pattern it is of the two, the outcome looks like to be the same. MACD bullish divergence on both time frames pointing towards 92.63 and 109.77 respectively.

Daily: Very interesting picture. Price action inside a long time descending channel. MACD bullish divergence pointing towards the 78.85 level. An iverted H&S formation could be in the makings with the right shoulder awiting for completion. I would expect the right shoulder to be formed around the 73.93 level which is the ultimate target south for lower time frames MACD bearish divergencies. Interestingly enough, the MACD bullish divergence (78.85) is precisely at the 61.8 fib level. Coincidence? Lets wait and see.

H4 & H1: Price broke a very steep ascending trend line this week. It started heading south supported by MACD bearish divergencies targeting 75.30 (already taken out), 74.40 and ultimately 73.93. The 73.93 is also confirmed on the M30 time frame.

Putting these two together, bearing in mind that both are negatively correlated, one can have a descent story of what is about to happen.

Lets see if this rather 'cartesian' instrument can show us something.

The white dotted lines represent the MACD divergence targets for each unstrument.