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U.S. Dollar has spent the last few years building the flag/pennant pattern in the chart above. Investors have benefited by buying on support and harvesting at resistance. For the first time in a few years, investors are attempting to break support of this pattern.
Often on a break of support, a rally takes place to test support, as resistance. Odds would favor a small rally at least in the Dollar here, to perform this key test. What happens at this test, how the Dollar acts, will need to be watched very carefully! If the Dollar can’t even rally to test resistance, it is in pretty big trouble!
Bruce….Great comment per the potential that it is early in the breakdown. Agree that the flag is usually closer to the end before the breakout/breakdown. Right now whether the flag/pennant is a correct read, the break of support does have my attention. If the decline does extend further, it could be the news Silver needs to break its key fib level that has been in place for almost 30 years.
Mike….I love to use the currencies as tools to help us decide where else to invest. Example…if the Dollar would fall 5%, which is a big move, I am not so much interested in investing in FXE as much as I am interested in what would go up four fold the dollars decline…say Silver or international stocks. Nothing wrong with owning FXE should the dollar fall further, I just prefer to own what the dollar really impacts.
Chris, would purchase of FXE be a good move at this time in addition to equities?
looking at the US Dollar chart you supplied –
Isn’t it a little early in the pennant formation for a breakout?
I know the market is the market, but for most pennants I seem to recall it being more to the end for a big whip, is my thinking correct or?
because it is early in the pennant do you think it mayl not have much force when / if it chooses to do so?
Yes, but a pennant usually consists of a longer move than this. Prefarably a (a-b-c-d-e)-move or something else with a more drawn-out pattern. This pennant looks a bit too compressed… and still we can see a mowe down to around 72-73 without breaking any substancialy lower. Also pennants show up in the middle of a move. I can´t see this happening here really because the pennant is also a kind of proportional to the wave-structure. This pennant of Yours looks a bit too big to fit.
But ok, there is always patterns that are breaking the “rules”. //otherwise good work