Gold: New Record High, $1388
October 14th, 2010Warning: This is not a recommendation to buy, sell or hold any financial instrument.
Continuing its sharp decline, the U.S. Dollar Index is nearing an important “make or break” level as indicated on the monthly interval chart below. This pattern is a massive bearish pennant, but as you can see, there are significant rallies as it forms. Even if the dollar manages to rally for weeks or months, the strategic picture remains bearish.
The question is: Will that pennant break down now, or are we in for another bounce?
My guess is that it will bounce around here because of the way some other assets are behaving. (I don’t want to get too into it because it’s just a bunch of snake oil, but the volume on UDN appears to show a lack of faith in breaking much higher and the Dow30 rally has some issues.) The very near term bullish hypothesis for the dollar is interesting, though, because, as far as I can tell, everyone and their brother is out in the media talking about selling the dollar.
Whether that support is taken out near term, or longer term, once it happens, that will signal a return to the-wheels-coming-off-the-cart chaos we saw back in 2008.
Related: Dollar Hits Fresh 15-Year-Low Against Yen
