Is The Dollar Topping?

An interesting result of the government bailout of the financials and automakers, along with the huge economic stimulus package will be the long-term impact on the U.S. dollar. Can the dollar maintain its relative value as interest rates fall and deficits mount? Let's take a look at a few charts regarding the dollar and how we can profit if the dollar does plunge. First, let's take a look at the long-term picture of the dollar:

As you can see, the long-term trend in the dollar is down. Unless the dollar can pierce through the 92-93 area, the intermediate-term trend is down as well. Only the near-term chart shows any positive action on the dollar. And that rally is suspect technically as shown below:

A bearish head and shoulders pattern formed from October through December and broke down below the neckline with force. Should the dollar fail to navigate the near-term resistance (retest of neckline) and the longer-term trend resumes to the downside, gold is likely to be a primary beneficiary. Gold is one commodity whose long-term uptrend remains intact because of the long-term downtrend in the dollar. Take a glimpse at the long-term chart on gold:

The dollar and gold have an inverse relationship that's quite evident when you compare the two charts. During periods of dollar strength, gold weakens. However, dollar weakness leads to gold strength. So the question remains: What happens to the dollar as a result of the massive government bailout and the economic stimulus package? Answer that question correctly and you profit. It's as simple as that.
Happy trading!

Commodities & Currencies

GOLD : A flight to safety, a ceiling, and the US Dollar

The gold and dollar have been moving together for most of January. The uptrend that the dollar has been enjoying has been accompanied by the gold market rallying to the resistance level created last September/October.

It’s a interesting global situation whereby the collective equities markets are suffering across the board, currencies are devaluing, yet the dollar — by comparison — looks good, but the global credit contagion has people running to safety and thus to gold.

You mix that all up and that gives you the chart of gold and the dollar moving higher together.

This could be changing though. Gold has reached a ceiling that could put an end to this. Prices have reached an area where there is likely to be a shift in power from buyers to sellers - that’s if the level stays intact.

Gold is the market of paranoia. Fear and gold rally.

Heck, greed and gold rally too! This market is the psychological pulse of investors and traders.