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U.S. Dollar has rallied a little over 6%, since bouncing off of rising support line, highlighted in this post (see post here). This rally has caused the usual challenges, some softer international and commodity prices. The Dollar now faces its first big Fibonacci and channel resistance test at (3). A natural breather for the Dollar is due right now.
If the Dollar quickly powers through this resistance, equities and commodities will see much more downside pricing pressure! I remain comfortable attempting to score on defense in the 500 index and Gold/Silver arenas with stops in place.
Mukesh…great comments. What I find interesting is this…what is new about the so-called “mess.” I am not saying this towards you, just that much of the challenges have been there for quite a while. Recall all the talk about how the PIIGS back in June were going to cause the Euro to break apart? It didn’t and the Euro rallied over 15%. Dollar is inside of a long-term pennant/flag pattern that is long from complete.
In looking at todays chart, I don’t know that I would call it a breakout as of yet. It is above fib, yet the resistance lines I drew are still in place. Dollar is off its highs of today, which looks to have caused stocks to rally. I did the dollar post, because it looks to me, as I mentioned earlier, that the Dollar is due a breather.
If this is correct, a 1-2% decline in the dollar could see stocks and commodities a lift.
Great job Scott on taking the info and making a good choice with the investment tools. This is an example of what I want to do for people, create the research and let people like you then use the info in a productive way.
Hi Chris. Loving this UUP move the last couple weeks. Bought on your recommendation when there were only 3% USD bulls (Jan 2011 $22 calls…). Would you call this next Fib breakout about 80.50?
If EUR remains a mess, with widending credit spreads of tottering countries, USD has nowhere to go but up as EUR makes 60% of the USD index. That is till gold takes over as the safe haven the funds migrate too in crisis. Gunning for 50% retracement for USD now.