The US Dollar Index has been rising strongly for most of this year, coincident with a major decline in broad based commodity indexes. However, we are currently seeing signs that the current price level may be the end of this strong run and lead to a major consolidation - likely coincident with a rally in overall commodities.
This chart shows the daily Dollar Index. There is a notable divergence on the momentum indicator between the October high and the current December high. The notes on the chart show that a typical price target after a divergence pattern would be for a retracement to the price low of the divergence pattern - in this case at about 84.50 which would be the next major horizontal price support on the chart.
Also while not shown on the chart the current Commitment of Traders data shows that the large speculators maxed there net long position at the October high as well, and the current run up from Oct to December has been on commercial buying which is opposite their normal pattern, and is a typical and classic sign of capitulation in a trend. This creates a compelling technical set-up for a sell out or short position. And the CoT data gives us confirmation from the "fundamentals" as evidenced in the extreme net short of the "smart money" commercial traders. The divergence or capitulation in commercial positions just gives us another aspect of market psychology suggesting that the trend is very close to an end.
USD is going to explode in any moment driving Oil down to at least $35, EUR to at least 0.98, Silver to at least $9. The DXY itself will reach in fast pace to at least 113. It will be so violent because it will be a moment of important 15 years long dollar downtrend resistance breaching. This moment in history will become known as "Dollar Storm" for future traders. The term "Dollar Storm" will leave mark in the textbooks. The reasons for my projetions are both technical and fundamental. I'll only list few of them:
1. Extremely beautifull bearish divergences on monthly timeframe formed in the beginning of this year on EURUSD and GBPUSD and possibly other pairs, and are nowhere near exhausted. or near down trend completion
2. The fear of dollar collapse "got tired": google.com/trends/explore First marked on April 2011 and confirmed on April 2014. Correlate with historic quotes of USDCHF, EURUSD, GBPUSD, USDJPY, USDCNH, USDRUB and XAUUSD you'll find perfectly logical correlations.
3. USDCHF 15 years long downtrend (look at weekly timeframe) challenging signifficalnt resistance right now and technically still looking very bullish making it very different chellenge from the previous resistance challenges, and if breached, a significant price move upwards is expected. That's what I believe will happen. The other scenarion - continue southwards is less likely because of negative santiment on the EUR - CHF tandem and positive on the dollar.
4. Non-existent shortage on commodities. My perfect example is XAGUSD: google.com/trends/explore . In the past there always were shortages before each silver bull charge. Correlate with chart.
Nevertheless I do not beleive in dollar to be the winner. I believe the dollar strength which is still pending, will also bring the the stock market into a deep correction, harden US explorts which will rise unemployment in the US once again which will trigger Feds QE policy again. That will coincide with the bottom on the commodities (personally I plan to buy Silver at $9) and the cycle continues, another inflation bubble and another top on the commodities, but that may not happen for years. Now it's show time. Dollar's show time :)
1. Extremely beautifull bearish divergences on monthly timeframe formed in the beginning of this year on EURUSD and GBPUSD and possibly other pairs, and are nowhere near exhausted. or near down trend completion
2. The fear of dollar collapse "got tired": google.com/trends/explore First marked on April 2011 and confirmed on April 2014. Correlate with historic quotes of USDCHF, EURUSD, GBPUSD, USDJPY, USDCNH, USDRUB and XAUUSD you'll find perfectly logical correlations.
3. USDCHF 15 years long downtrend (look at weekly timeframe) challenging signifficalnt resistance right now and technically still looking very bullish making it very different chellenge from the previous resistance challenges, and if breached, a significant price move upwards is expected. That's what I believe will happen. The other scenarion - continue southwards is less likely because of negative santiment on the EUR - CHF tandem and positive on the dollar.
4. Non-existent shortage on commodities. My perfect example is XAGUSD: google.com/trends/explore . In the past there always were shortages before each silver bull charge. Correlate with chart.
Nevertheless I do not beleive in dollar to be the winner. I believe the dollar strength which is still pending, will also bring the the stock market into a deep correction, harden US explorts which will rise unemployment in the US once again which will trigger Feds QE policy again. That will coincide with the bottom on the commodities (personally I plan to buy Silver at $9) and the cycle continues, another inflation bubble and another top on the commodities, but that may not happen for years. Now it's show time. Dollar's show time :)