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21gold.com / Morris Hubbartt / May 11, 2012
How does one interpret the action of the dollar? It’s clear that the economy hasn’t created enough jobs to sustain growth or stop the mounting deficits. If the economy is now weakening, the mounting US debt problem will continue to plague a dollar that is already mired in a long term bear market.
The situation in Europe brings an expectation of help for the dollar. Even with socialists taking power in France and further destabilizing the future of the euro, the dollar shows low trading volume. If the dollar can only rally slightly on news that the euro could be finished, serious questions arise for the dollar. All roads in this crisis lead to gold. Gold is my most preferred asset, now more than ever.
Note the black box on the chart. The dollar fell to 71.33 in early 2008. The lows in that box have not been bought that heavily by commercial traders, but the highs have been very heavily sold and shorted.
It will be extremely important to see how the commercial group reacted to the latest tumble in the euro. I suspect the next COT report will indicate that they have bought the euro and shorted the dollar fairly heavily.
The dollar has yet to trade above the right shoulder high at 92.33. I believe the current low-volume rally could end by May 16, which is next Wednesday. It’s an important date, because the latest FOMC meeting minutes will be released then.
Look at the enormous size of the head & shoulders pattern on this chart. It’s important to understand how big these timeframes are. The “neckline box” covers four years of time. This chart indicates that something big lies ahead that will trigger a final move out of the box.
The head & shoulders pattern indicates that the move will be to the downside, and even a rally towards the 90 area would have no effect on the overall picture.
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21gold.com / Morris Hubbartt / May 11, 2012How does one interpret the action of the dollar? It’s clear that the economy hasn’t created enough jobs to sustain growth or stop the mounting deficits. If the economy is now weakening, the mounting US debt problem will continue to plague a dollar that is already mired in a long term bear market.
The situation in Europe brings an expectation of help for the dollar. Even with socialists taking power in France and further destabilizing the future of the euro, the dollar shows low trading volume. If the dollar can only rally slightly on news that the euro could be finished, serious questions arise for the dollar. All roads in this crisis lead to gold. Gold is my most preferred asset, now more than ever.
Note the black box on the chart. The dollar fell to 71.33 in early 2008. The lows in that box have not been bought that heavily by commercial traders, but the highs have been very heavily sold and shorted.
It will be extremely important to see how the commercial group reacted to the latest tumble in the euro. I suspect the next COT report will indicate that they have bought the euro and shorted the dollar fairly heavily.
The dollar has yet to trade above the right shoulder high at 92.33. I believe the current low-volume rally could end by May 16, which is next Wednesday. It’s an important date, because the latest FOMC meeting minutes will be released then.
Look at the enormous size of the head & shoulders pattern on this chart. It’s important to understand how big these timeframes are. The “neckline box” covers four years of time. This chart indicates that something big lies ahead that will trigger a final move out of the box.
The head & shoulders pattern indicates that the move will be to the downside, and even a rally towards the 90 area would have no effect on the overall picture.
READ MORE
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