It’s not that bold to think that the dollar is heading lower. In fact it kind of just rolls off your tongue doesn’t it? This is something that we’ve gotten used to now for about 10 years or so. And sure, there have been some short term rallies in the US Dollar, but those have been nothing more than opportunities to sell. The real question is: When does it stop?
I wish I had the answer to that. All I can tell you is that I don’t think that this is the bottom. In fact, new multi-year lows are probably in the cards. Take a look at the chart below. After breaking below the 2 month uptrend line in July, that prior support turned into resistance in August. The next key level of support here has been the 72.40-72.50 area that has been barely holding on since June. After this many tests, I have to believe the break is coming.
With RSI showing zero sign of bullish life here and this many tests of the multi-month support, the break should take the dollar down to the May lows about a point lower than where we are today. All we have left after that appears to be the 2008 lows just above 71. But then what? There is the real question. We could be starring into the abyss my friends. What does that do to Stocks? Bonds? Correlations that we’ve grown to know and love for years? Do they remain the same? Change? What do precious metals do? Have they already been pricing this in? How much so? $UUP $USDX $DX_F $USD
All questions to think about as you’re drinking your pina coladas over Labor Day – and what many of us consider to be the last weekend of summer. I’ll be spending some time in the DC area checking out some historic stuff as I mentally prepare for my first football game of the season – Miami/Maryland Monday Night Prime Time. Gates open at 2, we’ll be there at 1:30.