USD: Chart Points to Major Reversal/Rally

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switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
USD: Chart Points to Major Reversal/Rally

A little contrarian thinking for you from Charles Hugh Smith:

Having stealthily formed a bottom, the dollar's chart looks like May-July 2008, just before it blasted off.

The obituaries on the dollar are flying fast and furious, but they are premature.Astute reader Robert L. asked for my views on the dollar losing its coveted reserve status in pricing global commodities. It seems to me there is plenty of sound and fury being expended on wild speculations about secret meetings and the looming demise of the once-mighty dollar but precious little illumination.

Rather than focus on "maybe's," let's look at a chart of the dollar from the point of view of basic technical analysis. Charts have the distinct advantage of not even pretending to reflect the fundamentals--whatever they might be.

I have written quite often on the dollar over the years--most recently:
Why The Dollar May Not Be Doomed (September 24, 2009)
Inflation, Commodity Prices and the Dollar (September 29, 2009)

I refer you to three entries I wrote in the March-early August 2008 timeframe for one good reason: the dollar exploded upward in August, gaining 22% in a mere four months. I laid out the case for just such a reversal in these entries:
A Technical Look at the U.S. Dollar's Decline (March 11, 2008)
Has the Faltering Dollar Reached Maximum Pessimism? (May 6, 2008)
How Goes the Dollar? (August 7, 2008)

Notice how the chart in March-July 2008 looks eerily similar to the last few months in the dollar chart. The dollar stumbled along for a miserable five months in 2008 (March - July) before reversing, and the stochastic has been oversold for the past five months.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: USD: Chart Points to Major Reversal/Rally

Switters,

Thanks for the post, but I wish I could see the whole chart in the original post. Are you able to see it?

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Volume in UUP

This is an interesting chart as well. Its shows ramping volume in the bullish USD ETF.

Speaking of the dollar: correspondent David B. sent in this intriguing chart of the U.S. dollar ETF, UUP with these comments:

 

Check that volume out on the weekly ... If I was looking for something conspicuous to mark a possible capitulation low on the dollar (like last year's low) it might be ramping volume.

(Click on the thumbnail to see the full chart in a new browser window.) 

BungeeBones's picture
BungeeBones
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Posts: 38
Re: USD: Chart Points to Major Reversal/Rally
switters wrote:

 

The obituaries on the dollar are flying fast and furious, but they are premature

They are really talking about the obituaries of thr Federal reserve Note aren't they?

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: USD: Chart Points to Major Reversal/Rally

Jeff,

I wasn't able to see the full chart either on his blog.  His posts appear perfectly in an RSS reader (I use NetNewsWire for the Mac), but often the charts are cut-off on his website.  Not sure why he hasn't fixed that yet.

Chris

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