You Have To Watch The US Dollar Chart Right Now…
Watch This US Dollar Chart Closely…
Without question, deciphering the stock market’s next move has become a bit more challenging the past few months. A continuation of the multi-year equity market rally has been thrown into doubt now that indices are sharply off the all-time highs set a few months ago.
Of course, much of the recent pullback in stocks has been due to fear of rising interest rates…
But with the US Federal Reserve’s rate guidance getting murkier by the day, investors simply have no idea if a raise is coming soon or not.
Trouble is, the US Dollar has risen dramatically the past year and a half on the premise the Fed would eventually send rates to higher ground.
Take a look…
As you can see, the US Dollar index rose sharply from mid-2014 to early 2015.
But also notice that since April of this year, the world’s reserve currency has traded in a rather choppy, sideways fashion.
And that’s what’s really catching my eye…
Notice the compelling technical pattern developing in the US Dollar index. The green resistance trend line is declining towards the red support line at $94.
Most technical analysts will agree this is a bullish continuation pattern.
If the Dollar were to break above the green resistance line, it would likely continue the uptrend from the 2014 breakout (purple line).
Here’s the deal…
The rally scenario I just described will likely only happen if the Fed follows through on their plan to raise rates.
But since global growth is currently showing signs of significant weakness, the odds are growing quickly that the Fed will delay liftoff by a few months- and possibly longer.
That means the Dollar’s continuation pattern above may morph into a topping pattern.
In other words, a break below the red line and the greenback could come quickly crashing back to earth.
If the dollar suffers a big downturn, it will have a huge impact on precious metals and other commodities…
Gold has already jumped $60 an ounce in October as investors pile into the rate sensitive asset on hopes of delayed Fed action. Silver, platinum, and palladium are seeing similar price revivals.
And don’t count out an end of year oil price rally if the Dollar careens lower.
Bottom line…
The US Dollar is getting close to a big move. And the direction it takes over the next six months will have a big impact on commodities.
In my mind, the US Dollar chart above is the most important thing commodity investors should watch in coming weeks!
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Commodity Trading
