THE DOLLAR IS IN HOT WATER: Dollar’s Recent Dive (And Its Implications For Gold)

The dollar index took a dive on Wednesday, and If the the dollar has indeed reversed course, then it would quite likely…

by Przemyslaw Radomski via Sunshine Profits

The USD Index took a dive yesterday and the precious metals sector rallied in response. USD’s decline took it well below previous December lows and almost to its October lows.

USD Index in Hot Water

At the same time, the U.S. currency broke below two short-term support lines: the rising line based on the October and November lows, and the declining line based on the mid-November and early-December lows.

Based on the shape of the recent price movement, the declining support line is also the neck of the bearish head and shoulders pattern. Breakdown below it is therefore very bearish for the short term… If the breakdown is confirmed.

This might not be the case, because both above-mentioned support lines crossed several hours ago and the USD Index stopped declining approximately at that time. What does it mean? It means that the USDX might have just bottomed at its triangle-vertex-based reversal. It is usually the case that these reversals are based on support and resistance lines, but they can just as well be based on two support lines or two resistance lines.

If the USD Index has indeed reversed its course, then it would quite likely invalidate both above-mentioned breakdowns. Invalidation of breakdowns would be a very powerful bullish sign for the following days.

The critical price level above which the USD Index would need to get back above is 97.25. This would open the way to a strong rally from the current levels. And it would kick the door open for a sizable precious metals decline.

Our profitable long precious metals position has been closed last week, and we’ve entered another trade immediately. This time, on the short side of the market, and despite yesterday’s move higher, it’s profitable again. And the upswing gives us the added benefit of pinpointing the upcoming turning points. That’s what the full version of this analysis features – you’ll find there all the key short-term PMs market action coupled with the targets of the already-profitable short position. Join us and profit along!