Thursday, December 30, 2010

US Dollar Update ~ 30 December 2010

The Dollar had a huge rally in the first half of the year, followed by a nasty sell off in the second half just to finish the year almost flat, so the inverse correlation between the USD and the stock market has worked out this year pretty well again.

If you have a look at the USD Index (dxy) you can clearly see the triangle which has been forming over the past few years:

Since I'm expecting a correction in the stock market early next year I think we'll get a rally back up to the trendline to possibly complete the (elliott wave) triangle. Supported by the FED printing machine I'm expecting the triangle to break downwards but whichever side it breaks there should be a nice trading opportunity sometime next year.

The €uro, the PIIGS' currency, most think the currency has failed and is doomed. I can't decide which currency is in worse shape though, the Euro or the Dollar...?

Looking at the EUR/USD chart, it appears to be some type of  a wedge/bull flag is forming. So if the USD Index is to go lower then the EUR/USD is likely to go higher:

Even though the DXY was almost flat for the year it was mainly because of the weak Euro. Against most other currencies the Dollar is way lower than a year ago:

In the face of the US and EU printing machines the safe-haven Swissie is hitting all time highs against both currencies. Since there isn't really any support below I've only drawn in the downtrendline - as long as it holds the USD/CHF is likely to go lower.

Also the Australian Dollar is hitting new all time highs. (Just spotted a nice little fractal (the two big red circles) - wish I'd seen it earlier...)

And also the USD/JPY is approaching its all time low.

So let's see which country devalues their currency fastest. I guess it'll be the FED, just because they are most experienced in printing money lol but let's see... : )