A Look at the U.S. Dollar Index
January 17th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I’m still bearish, overall, on the U.S. Dollar, but I have slightly less confidence in the bets that I’ve made. There’s no point in trying to parse all the bullshit in the financial press. Let’s look at the chicken entrails instead.
Let’s use a daily chart for the tactical picture:
U.S. Dollar Index, daily interval
I drew a fib fan over the rally up from 74.50. You can see how that has broken down nicely (back through all three fan lines). I then drew a fib fan and a fib retracement to check the progress back down toward 74.50.
I like that the retracement grid is still overhead from the first speed bump on the way down. Dollar bears don’t want it to crawl above that retracement grid, or above the fan. See that green candle above the fan? That kind of thing bugs me, as a dollar bear. Not much, but it has my attention.
Worry? Not yet.
The strategic view still looks promising for dollar bears. Here’s a weekly chart:
U.S. Dollar Index, weekly interval
In short, Helicopter Ben needs to cut rates to keep those candles inside that down trending fan. We don’t care which band it’s in, as long as the pig is going down. And dollar bears should hope that the cut isn’t priced in already!
When will I begin to lose faith in the collapsing dollar?
I don’t see any need to go there just yet, but I wouldn’t want to see green candles coming up and out of that fib fan. I really wouldn’t want to see those green candles climb through the overhead resistance formed by the previous channel.
But let’s not get ahead of ourselves.
For now, the mantra is, “Lean over you pig. Leeeeaaaaannnnnnnn over! Daddy needs to see some long, red candles. Come on, Ben, put the pedal to the metal on the confetti shredder.”
What could possibly go wrong?
Well, you may have noticed that creditor countries from around the world are essentially buying up Wall Street. A few billion here. A few billion there… Are they converting their own currencies into dollars when they go shopping, or are they using dollars that they already have? I don’t know the answer to that important question. If America is for sale, the purchasers need dollars… If you’re betting against the dollar… Well, I don’t want to cause your morning coffee to seize up on you…
What I do know is that I don’t want to see green candles above that fan on the weekly chart.
