The Dollar’s Tumble Accompanies A Host of Critical Currency and Commodity Trades

(This is an excerpt from an article I originally published on Seeking Alpha on July 1, 2012. Click here to read the entire piece.)

Thanks largely to the surging euro, the U.S. dollar index (UUP) took one of its nastiest one-day tumbles since last October, falling 1.3%.


The U.S. dollar tumbles, validating resistance at the QE2 reference price while the short-term uptrend remains intact
The U.S. dollar tumbles, validating resistance at the QE2 reference price while the short-term uptrend remains intact

I believe this drop all but confirms staunch resistance to further gains for the dollar index above what I have called the QE2 reference price, the price level of the dollar index right before Ben Bernanke telegraphed QE2 at the end of August, 2010. If the dollar continues to fall from here, such a move will likely take some pressure off the Federal Reserve to come up with more quantitative easing magic. However, it is not so easy to say that the dollar will continue to plunge from these levels either. {snip}


The euro makes another attempt to break above the 50DMA against the U.S. dollar
The euro makes another attempt to break above the 50DMA against the U.S. dollar

The strategy I outlined in mid-June has worked extremely well for buying dips in the British pound and selling on rallies toward the 50DMA with the U.S. dollar. {snip}


The British pound attempts to break resistance again at the 50 and 200DMAs
The British pound attempts to break resistance again at the 50 and 200DMAs

The U.S. dollar’s bounce continues against the Japanese yen (FXY) with the 200DMA still providing a general uptrend for June’s bounce. {snip}


The U.S. dollar clings to its recent rally against the Japanese yen
The U.S. dollar clings to its recent rally against the Japanese yen

The Canadian dollar (FXC) is not too informative. It has simply bounced around parity since last September/October. {snip}


The Canadian dollar is likely headed back toward parity against the U.S. dollar
The Canadian dollar is likely headed back toward parity against the U.S. dollar

Overall, on balance, it looks like a near wash of bullish and bearish forces playing against the U.S. dollar. {snip}

Perhaps the Australian dollar is the wildcard. {snip}


Australian dollar is looking for a catalyst to breakout of the recent two-week range. The RBA might just deliver.
Australian dollar is looking for a catalyst to breakout of the recent two-week range. The RBA might just deliver.

Finally, the plunge in the dollar just happened to coincide with other important levels in oil (USO) or (DBO), gold (GLD), and silver (SLV). {snip}


USO bounces sharply off October lows
USO bounces sharply off October lows


May's retest of support remains firm for GLD
May's retest of support remains firm for GLD


SLV had a close call with critical from Jan and Dec, 2011 getting temporarily broken before Friday's sharp rally
SLV had a close call with critical from Jan and Dec, 2011 getting temporarily broken before Friday's sharp rally


Source for charts: FreeStockCharts.com

{snip}

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 1, 2012. Click here to read the entire piece.)

Full disclosure: long EUR/USD, AUD/USD, USD/JPY, USO, GLD, SLV,

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.