U.S. Dollar Index

Weekly Technical Commentary
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By Art Huprich | 13 August 2008

Based on the Point & Figure chart configuration of the U.S. Dollar Index, following, there is room for the U.S. Dollar Index to run towards $77 - $78, minimum.


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Shown next is a RS trend of the U.S. Dollar Index versus the Euro. Admittedly it is difficult to see, but suffice it to say, "It has broken out."

U.S. Dollar Index versus the Euro

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and the U.S. Dollar Index versus the Swiss Franc

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and the U.S. Dollar Index against the Canadian Dollar. Suffice it to say, the "Loonie" is getting close to an important inflection point, versus the U.S. Dollar Index.


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Relative to the Canadian Dollar, if we change our perspective and look at a chart of the actual price trend (shown below), versus the RS trend shown above, following the "Loonies" parabolic move late last year, you’ll notice a critical breakdown has occurred and the importance of the long-term uptrend line.


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While short-term counter-trend moves will occur and should be expected, it appears to me that the U.S. Dollar Index is in the midst of extending its short to intermediate-term up trend. This should continue to pressure commodity prices.

For those looking for a fundamental reason as to why this is occurring, I asked Chief Economist Scott Brown, Ph.D. for some feedback. Here is Scott’s comment:

"Stagflation (slower growth and higher inflation) is a greater concern in the UK and Euro-zone than in the U.S.— these economies have clearly weakened and wage pressures are a much more immediate threat to inflation compared to the U.S. The dollar is likely to gain further ground against the major currencies, helping to push commodity prices lower."

The exchange traded fund universe offers a number of ways to benefit from the observation shown above.

  M O R E. . .

Normxxx    
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