YeOldGoldNugget's Blog Spot: US Dollar

Tuesday, December 29, 2009

The Dollar's Demise and Gold's Resurrection

By 79Atoms on Tuesday, December 29, 2009

The Dollar Consolidates while the Markets recover.

US Dollar Daily Chart

Chart is courtesy of marketclub.
Marketclub - US Dollar Trend Analysis

(What's this?)

Here is a short follow up on my most recent article 'US Dollar Extends Gains' written on December the 22nd. In that article I summarized the following :

To summarize, short term, yes we are in an UP trend, the chart confirms that. However, RSI has reached overbought. MACD is trending higher but with choppy performance. We are trading farther and farther away from the 30 and 50 MA so a consolidation is getting more and more likely to happen from here.

Mr. market was soon to follow this advice cause December 23 was the start of the consolidation/correction for the dollar after extending its gains from a low of 74.356 on December 2 to a high of 78.449 on December the 22nd.

Moving Averages

10 MA : 77.784
30 MA : 76.349
50 MA : 75.916

As of writing the dollar is trading at 77.388 and is thus already trading below the 10 MA. December 27 saw us crossing below the rising trend line indicating that the steam is out of this kettle for sure!

Looking at the chart and all indicators I reckon looking up from here is wishful for those who are long dollar but not very realistic. Down is where I would look. Short term and long term. Market manipulation excluded then cause I am no match for that.

I say manipulation because if you have a look at the charts from Early December and in particular December the 2nd. The dollar starts to rise and right at that time gold starts to drops. Now, OK, I can understand all the dollar/gold relation and safe haven and such...

...but what I do not get is why even after having such a crisis, after knowing what the dollar is worth now or actually ISN'T worth after the stimulus packages, TARP, FED printing presses, Bank bailouts, Company bailouts,...investors are still buying dollars. So...who are these very first buyers driving up the price and starting this Christmas rally in the dollar?

This is no rally based on valid fundamentals. NO Sirree!

So, let me see if I understand Mr. Market? Ok?

So, December 2, gold breaks down and the dollar rallies or vice versa, the dollar rallies and gold breaks down. So, later we get word from the European mainland that Greece, Spain and Ireland are in deep...um...horse manure? Is that the right noun to use? Up to their arm pits in the proverbial debt-pit.

The Dollar's Demise - A full motion picture Documentary

So, because the Euro takes a beating, the dollar who for months has had the leading role in our documentary as being the biggest decliner now steps aside and lets the euro play leading role for a while?

Hm? What does not sound right in this motion picture?

This sounds to me like too much artistic freedom on behalf of the director of this documentary. My original remarks remain, unless the dollar succeeds to AND close above 80.00 and STAY above 80.00 the dollar is in my books at least very much in a downward trend.

US Dollar Weekly Chart

US Dollar Weekly Chart December 29, 2009

Chart is courtesy of marketclub.
Marketclub - US Dollar Trend Analysis

(What's this?)

Weekly then, well this hasn't improved much. I'm still not swayed, not even by the rally we had since the start of December. It is still too insignificant a move to even be treated as such. For me, I would stay far far far away from any long positions in the dollar for the moment.

From the MACD indicator we can see this is still clearly trending below the center line and thus still bearish as indicator. Histogram is also declining.

Dowsing Rod - Image from http://skepticreport.com/sr/?p=564

The ADX or Average Directional Indicator is in some sort of limbo on the weekly chart? Don't know if this is a chart bug or if the -DI and the +DI just happen to run parallel for the last couple of days.

Maybe it is forming a wishing rod and hoping then to break it in the right place and have their wish come true? Who knows?
Maybe even a dowsing rod? Searching for water? No,..must be an oil dowsing rod then.

Anyway, until this market takes direction again ADX is probably not a good indicator here on the weekly besides than the fact that we see that there is some sort of sideways action to expect perhaps.

Long term like I said, until we clearly break above 80.00 I consider the trend which was downwards still very much intact. Despite the short rally.

I don't know how many more lessons Mr.Market needs but sooner or later this dollar/gold relation will be gone and out the door for GOOD!

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Tuesday, December 22, 2009

US Dollar Extends Gains

By 79Atoms on Tuesday, December 22, 2009

The Dollar Increases on the Euro's Decline.

US Dollar Daily Chart

Chart is courtesy of marketclub.
Marketclub - US Dollar Trend Analysis

(What's this?)

I'll just do a quick run down on the chart.

I've added the ADX chart. Again on the ADX for those who have not used this indicator before, the Average Directional Index can determine trend strength regardless of the market direction. This non-directional oscillator is based on a range of 1 to 100 (although movements over 60 are rare). If the line is under the 20 mark, the trend is considered to be weak. If the line is above the 40 mark, the trend is considered to be strong. The ADX line is built on the results of two separate technical indicators, the +DI (force of up-moves) and the –DI (force of the down-moves). The default for this study is 14 periods which takes into the consideration the measurements of the +DI and –DI for the last 14 periods.

Knowing that and looking at the chart, you can clearly see that the -DI has had the upper hand for most of the year since March 2009. That changed however early December when the dollar started rallying on the very bad news that was coming out of Europe and in particular from Greece, Spain, Portugal and Ireland.

Have a read through following article.

The MACD or Moving Average Convergence Divergence is clearly trading upwards and on the daily trading above the center line. It has not been above the center line since March 2009. So daily and thus short term the trend is UP.

RSI or Relative Strength Index has reached the overbought zone.

To summarize, short term, yes we are in an UP trend, the chart confirms that. However, RSI has reached overbought. MACD is trending higher but with choppy performance. We are trading farther and farther away from the 30 and 50 MA so a consolidation is getting more and more likely to happen from here.

US Dollar Weekly Chart

US Dollar Weekly Chart December 23, 2009

Chart is courtesy of marketclub.
Marketclub - US Dollar Trend Analysis

(What's this?)

MACD, well we are still trading below the center line which confirms that weekly we are still not out of the woods yet. The histogram however shows a nice steady increase, one which qualifies as being strong and steady.

RSI is hovering around 50 which leaves plenty of room either UP or DOWN.

From earlier on in the article you already read about the ADX indicator. Well, then you know that the blue line does not tell you anything about the direction but merely the strength of the trend. Our blue line thus was increasing from March 2009 until the beginning of December 2009. Now because the dollar was dropping since March our blue line thus indicated that there was a strong DOWN trend.

Now that we see the ADX bending down and going lower we can thus assume that the strength of the down trend has decreased.

The +DI however was trading upwards but has now flattened out so I will have to wait and see if we get any higher beyond from where we are now.

From the chart we also see that we are now trading above the 10 and 30 MA on the weekly. That still leaves us the 50 MA at around 80.56. Until we have clearly taken out the 80.00 there is no difference to the long term trend...which is still DOWN by the way.

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