The Dollar Rally

By Colin Twiggs
October 29, 2009 4:00 a.m. ET (7:00 p:m AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.

The US Dollar Index broke through resistance at 76, warning that the primary down-trend is weakening. Expect a test of 77.50. Breakout above 77.50 remains unlikely, but would indicate that the down-trend has ended.

US Dollar Index


The euro is testing the lower border of its trend channel. Downward breakout would warn that the primary up-trend is weakening. Reversal below $1.45 would indicate that the up-trend has ended.

Euro US Dollar

Pound Sterling

The pound is ranging between $1.60 and $1.66, indicating active management by the two central banks. The ranging market presents a good trading opportunity. Upward breakout remains unlikely, but would offer a medium-term target of $1.72*.

Pound Sterling

* Target calculation: 1.66 - ( 1.66 - 1.60 ) = 1.72

Japanese Yen

The dollar is retracing to test support at ¥90. Respect of support would signal a rally to test the upper trend channel; failure would indicate a test of the December 2008 low of ¥87.

US Dollar Yen

Australian Dollar

The Aussie dollar reversed below support at $0.91, indicating a test of the lower trend channel. Breakout below the channel would warn that the primary up-trend is weakening.

Australian Dollar US Dollar

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An alternative lesson from the double dip the economy took in 1938 is that the GDP created by massive fiscal stimulus is artificial. So whenever it is eventually removed, there will be significant economic fall out.

~ David Einhorn - Greenlight Capital