Friday, February 17, 2006

USD Trend Line

The USD trend line has been heading up in a channel for the last 4 weeks. This appears to be a little rally in a USD decline that started in November, the month that saw a head develope in a head and shoulders topping pattern to the year long rally in a long term bear market of the USD. The USD got back up to the neckline of the H&S pattern and appears to be stalling out now.

What is particularly interesting are the proprietary momentum indicators in Investor's Business Daily which have a particularly good track record. For the USD, they are hard up against the overbought level.

If the USD is really overbought and is going to break its upward trend line, then other related items should be in an over sold position. What might they be and what are IBD's momentum indicators saying about them?

USD - over bought
Gold - over sold
Silver - almost at over sold
Light Sweet Crude - over sold
Swiss Franc - over sold
Euro - over sold

On top of this, many gold and silver producers & explorer shares, and the HUI Index, have gone down in this gold & silver reaction, held at important support levels, and have just broken their power down trend lines to the upside.

It sure looks like the USD trend line is about to change in an important way and provide a stonger tail wind for gold and silver.

A futures chart of the USD

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