The Sinking Dollar
By Colin Twiggs
August 6, 2009 3:30 a.m. ET (5:30 p:m AET)
US Dollar Index
The US Dollar Index is consolidating in a narrow band above 77.50 after breaking through primary support at 78.50. Expect retracement to test the new resistance level, but penetration of short-term support will signal further decline — with a long-term target of 74*. Recovery above 78.50 is unlikely, but would warn of a bear trap — confirmed if the index rises above 80.
* Target calculation: 78.50 - ( 83 - 78.50) = 74
The euro reflects the inverse of the dollar index, testing short-term resistance at $1.4450 after breaking through primary resistance at $1.43. Expect an upward breakout, indicating a primary advance with a long-term target of $1.50*. Retreat below $1.43 is unlikely, but would warn of a bull trap — confirmed if support at $1.40 is penetrated.
* Target calculation: 1.43 + ( 1.43 - 1.35 ) = 1.51
The dollar is consolidating between ¥94 and ¥96. Upward breakout would warn of reversal to a primary up-trend, while downward breakout would signal a test of the lower channel border — around ¥90*. The long term target for the down-trend is the December low of ¥87.
* Target calculation: 92 - ( 94 - 92) = 90
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The Aussie dollar surged through resistance at $0.82 against the greenback, boosted by rising commodities prices as indicated by the CRB Commodities Index. Expect retracement to test the new support level, but breakout above short-term resistance at $0.85 would indicate a further advance with a target of 87*. Reversal below $0.82 is unlikely but would warn of a bear trap — confirmed if support at $0.80 is penetrated.
* Target calculation: 0.82 + ( 0.82 - 0.77 ) = 0.87
The weirder you're going to behave, the more normal you should look. It works in reverse, too.
When I see a kid with three or four rings in his nose, I know there is absolutely nothing extraordinary about that person.
~ P. J. O'Rourke