A Dropping Dollar? Not So Fast...

At the time, I called it the most obvious breakdown on the market…

“The greenback is starting to walk the plank this morning,” I told you on Jan. 31. “Now it’s only a matter of time before it breaks down and moves sharply lower. When it does, it will complete the final part of a downside move that’s been forming for the better part of the past six months…”

Now that a few weeks have passed, things have not turned out exactly as planned:

USD Index

I was dead wrong on this one. Looks like the most obvious breakdown isn’t so obvious anymore…

A lot has happened over the past couple of weeks that have turned this dollar breakdown into a massive run higher. The British pound was absolutely stomped last week, hitting its lowest level since 2010 after Moody’s downgraded the UK’s credit rating from AAA to AA1. And the media has really run away with the “currency war” theme as Japan pushes the yen lower…

For now, the dollar wins the “best of the worst” award. And after a failed breakdown, it’s not unusual to see a big move in the other direction. With the dollar index topping 5-month highs this morning, you should take warning. Don’t bet against the greenback right now…

Greg Guenthner
for The Daily Reckoning