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The U.S. Dollar currently finds itself touching a series of support lines at (3) in the chart above. Often times the Dollar has rallied when world tensions have increases, the so-called “flight to quality!” Of late the Dollar has declined, during the challenging news of late in Egypt and Lybia.
Support is support until broken!!! If the Dollar does breaks key support at (3), it could decline a good deal! Could a Dollar breakdown cause Silver to push above key Fibonacci resistance? Very possible, be prepared for the ripple effects due to the next big move in the Dollar.
Ty…. Flag continues to narrow and the Shanghai lost around 1% this past week. No breakout/breakdown so far.
Belsha…Could the Dollar rally from here? You bet Belsha!!! As you noticed, a TON of support is at hand and very few Dollar bulls can be found. We are actually long the Dollar right now, yet have a TIGHT stop on it. I was attempting to highlight that if support does fail, the next step for the Dollar could be a really large decline! As the Dollar is facing support, the Euro is facing resistance. Support in every product ends up giving way and resistance ends up being taken out. Is now the time? Will see…I just want investors to be ready for some really BIG price action.
Ty…Support is support until broken and very few Dollar bulls are present. Bought the Dollar a few weeks ago and still hold the position. Had a gain and is has slipped away. Tons of support is at hand, yet should the Dollar fail to hold, the next step down could be rather sizeable. Just attempting to prepare investors for this key situation.
p.s.: Can you post an update to the Shanghai “Flag Pattern” chart? Love it!
I am betting the USD reverses right here. The EURO is doomed. Portuguese 10 year yield is at an all-time high, Ireland wants to renegotiate its bail-out terms, and people are taking to the streets in Greece again. When a forced bail-out is announced for Portugal this week or next (to protect German and French banks) EURO will tank…
Chris, I understand that the fact the dollar didn’t rallye with the lybian crisis mini-selloff on equities is troubling… Yet, don’t we see a double bottom on rising support line in the last week, or even a quadruple bottom going back a few months more? Couldn’t this also be the prelude to a huge dollar rallye, since the dollar action somewhat looks similar as to what happened back in june-july 2008?
TA…The majority of the time/recent history if the Dollar falls, equities have moved higher. I have no proof, yet I can’t help but think somewhere along the line if the Dollar would fall very hard, stock owners might become concerned.
What will dollar breaking support mean for equities? I saw another chart elsewhere that commodities going up helps the index only so far and at some point, causes equities to sink.
Hey Brian… Good question. Right now I am long TLT, like the action and will remain an owner until breaks key support. As I shared in the Dollar post, I bought the Dollar and still own it and support is still in place.
If this multiple support point breaks, a multi-year support will be taken out, which could lead to a decent decline in the dollar. If history is any guide, commodities should do well.
Even though the odds favor support will hold here, a break would become a pretty big deal.
If the dollar tanks, what happens to TLT?
P.S Love the Blog!