The widely trumpeted and long-anticipated rise in the Fed funds target rate happened on Wednesday. The assumption was that all interest rates would move in tandem and the increased interest rate differential would benefit the US dollar. It has not and among the many reasons are that it was already a crowded trade and chairwoman Janet Yellen’s comments which were dovish; a recipe for disappointment. Since October prices, volume, and open interest in the dollar index future had been rising (to its strongest since 2002), overbought with declining bullish momentum. We have a potential head-and-shoulders pattern above the top of the rectangle of the previous 22 months. When completed, with a weekly close below 99.50, expect a drop to 96.

Nicole Elliott is a technical analyst