I refer to my post of May 9. I mentioned that my profit target for the USD index was $86-87, corresponding to the upper side of the rising wedge technical formation: see weekly chart above.
We have now reached that price level as the US Dollar index is currently at $86.28 and even reached a high of $87 two days ago.
On the daily chart below, we can see that the stochastics and relative strength index (RSI) technical indicators are in the overbought zone and are starting to go down: this is a potential sell signal. I know some of you have bought the PowerShares DB US Dollar Index Bullish Fund (ticker: UUP), an ETF that tracks the USD index. I think the time has now come to take some of your profits off the table. This sell signal would be deactivated in the event the USD index would break out above the resistance that appears on the weekly chart and stay there for some time.
If the USD index starts to go down in the weeks to come, this would help the price of commodities (energy and agricultural) to start to rebound. Commodities (to the exception of precious metals) have indeed been in a bearish trend lately as they are inversely correlated to the US dollar.
Note that the US dollar and gold - contrary to what typically happens - have been moving together the past few weeks as more countries pop up on the radar for serious financial issues. This is helping to boost both the US Dollar and gold as investors around the world start buying what seems to be safety.
No comments:
Post a Comment