Tags: Hans | Parisis | Dollar | Rally

Dollar Rally Technicals Falling into Place

By    |   Tuesday, 15 Dec 2009 02:14 PM

From a technical standpoint the Dollar Index now has accomplished an eight-day move up that is part of a multi-wave up since its Nov. 26 low at 74.23.

In my opinion, I have no doubt this advance should be the initial push of a much larger rally that could carry the Dollar Index well above the March high of 89.62.

The Dollar Index broke resistance at 76 and the Relative Strength Index (RSI) broke upward momentum resistance at 55. From June to November, the 50 to 55 zone marked the RSI resistance range.

Investors should take note that these two breakouts suggest the start of a new uptrend for the U.S. dollar. The Dollar Index at 77.5 becomes now the first upside target.

Nevertheless, near term, a smaller wave setback shouldn’t be ruled out. In fact, that would be very helpful, if it occurs, in that it would narrow considerably the final up target range.

Should the Dollar Index continue to its next resistance around 77.5, gold may correct further towards to $1,075, which would mean a 50 percent retracement and a breach of its upward trend. We’ll wait and see what happens.

All that said, according to CFTC data, we see now short positions in the euro for the first time since April. Also, note that the euro has moved down 4 percent against the dollar this past fortnight.

All this happens at the moment that fiscal weaknesses in the periphery of the Eurozone have finally come in the spotlight. Whether or not a debt crisis can be avoided in Greece remains to be seen. Nevertheless, the whole affair has, once more, raised questions about the political and structural mechanisms of the Eurozone.

Uncertainty in this regard stems from the fact that officials cannot endorse any other scenario than one that sees deficit reduction. So, take public assurances (I’m not saying warnings) from senior EU officials with a pinch of salt.

They have a serious problem on their hands that is not limited to Greece and that can’t be resolved quickly. For some time to come the euro won’t be the anti-dollar currency of choice.

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HansParisis
From a technical standpoint the Dollar Index now has accomplished an eight-day move up that is part of a multi-wave up since its Nov. 26 low at 74.23. In my opinion, I have no doubt this advance should be the initial push of a much larger rally that could carry the Dollar...
Hans,Parisis,Dollar,Rally
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2009-14-15
Tuesday, 15 Dec 2009 02:14 PM
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