USDX Divergence

Published on Sunday December 23rd, 2012 at 06:11AM by Fxwhitebelt

Perhaps someone could help me here.  I am trying to understand USDX and EURUSD divergence.  On the daily timeframe charts below there appears to be a divergence.  Looking at the EURUSD in isolation I was looking for a retracement before further advances.  Is this corroborated by the divergence?  Please help :-)

The way I am reading this is that the USDX is more important and therefore my initial reading of further advances for the EURUSD my be wrong.  If the picture for the USDX is beginning to look more bullish then it means a larger decline is more probable.

My confusing myself and should just switch everything off for a few weeks. ;-)

Any help gratefully received.

WhitebeltFX

 



 

  • 2 comments
  • Go to Brad's profile

    On Tuesday January 8th, 2013 at 10:12AM by Brad -

    I don't normally trade divergences too much, but I thought I would reply.  I assume there is what is called hidden divergence on the chart.  Normally, you would use an oscillator to show divergence, so it is difficult to see in your chart.  Hidden divergence is supposed to signal a possible trend continuation.  This, of course, like everything else in trading, depends on a degree of probability, in that divergences are only right a percentage of the time.  I'm not sure what that percentage is.  In this case, I think the divergence would signal that the Usdx would continue down, which I think that it may be actually going in that direction.  If your chart starts to break downward out of the 79 area support, then we have a greater probability of further downward movement.  

  • Go to Fxwhitebelt's profile

    On Tuesday January 8th, 2013 at 10:39AM by Fxwhitebelt -

    Thanks, that seems to make sense.  I will see what happens when (if) USDX comes back down to the 79 level.  Thanks again for feedback and good luck.

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