The document summarizes the shift in sentiment around the US dollar that occurred from early 2017 to mid-2017. In early 2017, most analysts were bullish on the dollar and predicted it would strengthen further due to expected US interest rate hikes and fiscal stimulus under Trump. However, technical analysts using charts identified a potential trend change at the start of the year. By mid-2017, the dollar had weakened significantly against the euro, with the euro rising 13% against the dollar from its January low to its high in July. This shift showed that identifying trends from price charts, rather than fundamentals alone, can provide a more accurate picture of currency movements.

1. THE DOWNTREND AND THE BEARISH MOOD VS $ ARE NOW WELL IN
PLACE, BUT LET’S MOVE BACK TO THE START OF 2017:
Greenback, back to green ?

2. Do you remember the prevailing mood toward the US $ at the beginning of the year ?

3. The roughly mirroring picture through the EURUSD chart

4. Some fundamentalists had their idea about the fate of the US currency, backed by logical and obvious statements
Please find below an extract from one of the numerous fundamentally $-bullish comments received at that time,
this one was issued on Jan10th :
“Dollar index likely to climb to 115 on FED rate hike prospects
The United States dollar index is likely to continue its post-Presidential election merriment even in 2017.
We foresee that the dollar index (DXY) will jump above 107 by the first quarter (…)
Also, we expect that the gains in dollar index will be above the Euro for the first time in 14 years.
Not only are US interest rates on the way up in contrast with the rest of the developed world, but long-term rate differentials will continue to widen to record levels.
The economic growth in 2017 is also likely to remain moderate in the near future between 2-2.5 percent supported by Donald Trump’s fiscal stimulus
in the form of rising government spending, expanding military and tax cuts.
Following this, the Federal Reserve will be forced to hike interest rate further in 2017. We foresee that the central bank will hike 25 basis points thrice next year
- first in June, second in September and the last as usual in December. This will further boost demand for U.S. dollar.
Moreover, it is worth noting that the rising demand for U.S. dollar is mainly because of Donald Trump’s fiscal spending appeal, which is expected to be financed
from government borrowing and not because of growth in U.S. economy.
If Trump successfully implements his fiscal plan, consumer inflation will surely rise, giving the Federal Reserve wider space for an interest rate hike.
Thereby, rising Fed fund rate will increase the cost of borrowing. After the Presidential election result, dollar index witnessed a massive buying, sending the DXY
higher by 8 percent to 103.62 in just a month’s time.
Lastly, we expect the DXY, which recently broke to 14-year highs to rally by more next year and then break its 2001-2002 record of 120 later in the cycle.”

5. Even technicians including some of the finest Elliotticians were strong $ bulls
This extract below was received mid-December, when the EUR/USD was nearing 1.0550
Those technicians were even making fun of the arguments of the fundamentalists:
Only the reasons were different but all agreed on the direction, $ UP.

6. But Melly4X.ch clients were made aware of the likely turn in the $ trend
On my side, ignoring as always everything but my charts, this is how I started the year with my first daily comment:

7. First, the yearly pattern I mentioned…

8. …then the monthly one…

9. and finally the weekly pattern that helped me turn bullish EUR, bearish USD at the start of 2017

10. This is what happened: a high on the $ Index at 103.82 on Jan3rd, followed by a 9.6 % drop onto last Friday’s low at 93.86 !

11. And on Eur/$: last Friday’s high at 1.1683 is 13 % above Jan3rd’s low at 1.0341!

12. The very definition of a downtrend is a series of lower lows and lower highs.

13. The very definition of an uptrend is a series of higher highs and higher lows.

14. If you like it, share it and if you want to share it, like it!
Objectively, using the definition of a trend, we see the 9-year-old EURUSD
downtrend would end only once above 1.1714. The high on
Friday July21st was 1.1683 and the close 1.1663.
Squaring EUR/USD long positions at current levels looks
consequently rather sensible to me.
Subscribers to melly4x.ch
will continue receiving the daily updates, above or below the
key 1.1714 threshold.

15. © Melly4X.ch, 23.7.17, 2pm Ldn time