The greenback is starting to walk the plank this morning.
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…
The U.S. dollar index didn’t even come close to its July highs during its fall rally. Instead, it’s feeling out its next move lower. The breakdown zone is right near 79 — a mark that’s getting closer every day. When we do see a meaningful move below 79, the reaction is set to be a swift drop that will eventually drag the dollar down toward 2011 lows.
Of course, it doesn’t hurt that the Fed’s aggressive easing policies continue to escort the dollar lower. Just yesterday, the Fed announced it will continue its $85 billion bond-buying stimulus plan in an effort to achieve lower unemployment. Meanwhile, the dollar drops to a 13-month low against the euro, according to Bloomberg.
There are numerous technical and fundamental factors stacking up against the dollar right now. It’s time to watch these levels closely and prepare for a dollar dump…
for The Daily Reckoning
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
Greg it isn’t really obvious from your chart. It looks like the dollar did well during the summer vacation season, fell afterwards and is on a slow but steady increase.
That’s the way I read the chart. Perhaps I’m missing the obvious?
The chart above looks bearish for the dollar, but gold looks very bearish at $1575. Gold looks headed for $1000 to $1200 maybe and then later on down onto $1000. And then wait this bear thing out and pick the pieces up around $800 to $900 or lower possibly.
PEOPLE MY AGE REMEMBER THE LAST BEAR MARKET WITH GOLD, AND BEAR MARKETS WITH GOLD ( OR ANYTHING ELSE ) DIE OF EXHAUSTION. The gold bear market series of cycles can go on for five or the better part of ten years, and playing each cycle embedded in it is like catching a ride on a falling knife….The bargains come and go, only to come again even better, as the entire market is cut away.
No-one knows where gold is headed, but the atmosphere in the world currently now is quite deflationary. Interest rates are zero and paper money is gaining value, albeit slowly. Prices are falling, albeit slowly. Wages are steady or declining, if you have work at all.
If you shove someone outside, they end-up into an economic/political rut. In Watsonville, California I am in the orbit of the Obama Democrats in California, and I will vote for President Obama or his recommended candidates, just as everyone else will, because the economic/political rut is gravitationally that way on my brain and on my bank account. We “lean forward”.
People with billion dollar bank accounts might not understand Watsonville, CA nor care to understand Spanish, immigrants, skateboards, laughter, pets, hot rods, dating, and liberalism. Their economic/political rut is gravitationally maybe with the oil and cattlemen in the Republican Party in Texas.
As the U.S. exports more and more oil, the dollar can walk all the planks it wants, but more and more dollars are coming back to America to buy its oil. What do dollar traders say about that?
The only way for the dollar to then fall off its plank is for Bernanke to do a wholesale print job to make it fall off its plank….. Anything is possible, but I doubt that would happen.
According to the EIA, U.S. oil production is set to peak in May as shale drillers cut back enough to actually cause a decrease in oil output. As Matt shows, we can expect oil prices to stabilize soon after, meaning now is a great time to pick up well-run oil companies before they too rebound.
China is a buy on the dips market until the dips don't pop or we get the fireworks of a blow-off top. I'm not trying to oversimplify things--but buying the dips is the best way to handle a manic market like this one.
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Traders have two options in this market: speed up...or slow down. And since I hope you have a life outside of watching a computer monitor between 9:30 and 4, I suggest you put your daytrading dreams on hold for a bit and hit the brakes.