Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Alert, Revenge of the Greenback?

Currencies / US Dollar Oct 26, 2009 - 09:06 AM GMT

By: Clive_Maund

Currencies

Best Financial Markets Analysis ArticleThe dollar is at a crossroads and there are two probable scenarios. One is a final plunge following the recent grinding decline to an intermediate low that is followed by an intermediate reversal. The other is that it suddenly breaks out upside from the severe downtrend it has been stuck in since early March and rallies strongly, strongly because it is likely to be juiced by a sudden wave of panic short-covering.


On our 1-year chart we can see the downtrend in force from March and how, although it has continued to drop stubbornly to make a succession of new lows since July, the lower support line has converged towards the more steeply falling top line of the major downtrend - the downtrend appears to have morphed into a bullish Falling Wedge, although we cannot, of course, be sure that this is what it is until it breaks out upside from the downtrend, as until it does there is always the chance that it could simply breach the support line and plunge towards the original lower channel line, which is the pale red line produced into the future. However, we will know know soon enough which direction it will take as the Wedge is rapidly closing up, meaning that we should see a strong break one way or the other shortly.

This dollar chart certainly looks grim at first sight as superficially there appears to be little to stop it plumbing new depths, and there is certainly scope for it to do so as measured by short-term oscillators such as the RSI and MACD indicators (not shown) the dollar is not heavily oversold right now, due to the incremental nature of its recent decline. However, the Full Stochastic shown at the top of the chart, which is a fairly reliable indicator, does show it to be heavily oversold with a strong chance of turning higher, in addition to which the index and its 50-day moving average have now opened up a large gap with the 200-day, increasing the chances of a significant intermediate reversal soon.

A bullish interpretation of this dollar chart accords with the bearish looking charts for stock indices shown in the Market Crash article posted last week. Pronounced bearish Wedges are evident on the charts for the S&P500 index, the S&P500 index in Euros, where the convergence is very strong, and the HUI index and the Toronto Stock Exchange Index (CDNX). It accords because we would expect to see the dollar rally when stockmarkets drop, and we may see a repeat of last year with investors panicking into Treasuries, even if this time round they are a little more cognizant of the fact that these are not exactly the best places to put your money.

While silver is looking ready to correct back substantially with stockmarkets, gold continues to look strong thus far, which is something of a riddle that could be explained by investors possibly panicking into Treasuries AND gold this time round, which would mean that the dollar and gold could rise simultaneously. This is unlikely to help PM stocks though, at least not initially.

One of the biggest warnings that the dollar may be about to break sharply higher is the near universal bearish sentiment towards it, which is reflected in the plethora of dollar bearish articles doing the rounds. Here are the titles of some of them that have appeared this month... "Dollar forced to Abdicate", "End of US Dollar Global Reserve Currency", "Faces of Death: the US Dollar in Crisis", "They're Destroying the Dollar", "Dollar to Extend Slide as Global Economy Recovers", "What Happens if the Dollar Crashes", "What if you were invited to a party to sell your dollars?" and "Bleak Week for Spurned Dollar". Links are not provided to these articles as apart from the invaluable time used reading articles on www.clivemaund.com you should be spending more time with your family.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2009 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in