The Currency Window - Print Version

Money is something you got to make in case you don't die.
Max Asnas

Today was a strange day, the dollar closed lower and so did all the metals. This most likely indicates that we are now at a very important juncture and something dramatic is about to happen soon. This could be a sudden break out by the dollar or a break down in Gold bullion or a dramatic reversal in the price of bullion. This type of action does not tell you where the dramatic action is going to come from, just that there will be something happening soon. From mkt update Sept 7 2004

The thin blue line represents strong resistance, which the Canadian dollar seemed to have overcome rather easily. The move that has taken place in the last few days is usually indicative of some sort of climactic top. Time will tell if we are right or wrong. However we would not be long-term buyers at these prices.

The pound broke through its 9-year resistance zone pretty easily and went to put in a 9 year high. It is very interesting to note that the pounds main up trend line passes through roughly the top of the channel. This means that we will most likely only correct to about 1.70 and then start to rally again.

The US dollar has bottomed around its 9 year low that was set in 1996; however if you look closely you see that the real low was set in middle to late 1995. This is why we are sitting cautiously on the sidelines before issuing a major buy on the dollar, because it is possible that it could spike to a new low just to shake of many of the new dollar bulls and sucker many Gold bulls into taking new long term positions. One possible scenario is gold has a sudden spike up and the dollar a sudden spike down, followed by a quick reversal in both the dollar and Gold.

We are almost sure that if the dollar were to spike down it would flash a huge positive divergence signal on the hourly and most likely daily charts, at which time we would be pounding the table for everyone to take new positions.

Right now the Dollar is valiantly trying to stay above its main down trend line. To make a long story short the picture continues to remain murky.

It has enjoyed a rather spectacular run up and its time for a nice healthy correction. A pull back to the .70 zone would be a good place to take new long term positions if it held.

The Swiss franc appears to have steam for one final leg up before correcting, after that the Swiss franc should correct to the main up trend line. If it holds there then the bull will still be strong if not we could correct all the way to the .60-65 ranges.

When you look at all the above strong currencies one theme seems to emerge, they all seem to be topping and or correcting. The dollar on the other hand seems to be trying to put in a final bottom. Just using trend analysis we can conclude that longer term all the strong currencies have to correct to the main up trend line and so the dollar will appreciate when this process starts to pick up speed. The dollar has corrected so brutally and some of these currencies have appreciated so much that we could actually end up having a dollar rally that could last 6-12 months. This could have the potential to shatter the bullion market (except for Palladium) providing yet another mouth-watering opportunity to load up. Every strong bull market has one huge nerve racking correction and so the Gold Bull could end up experiencing its first massive correction. However more time and data is needed before we can actually say this with any degree of certainty. The dollar is currently in no mans land, it keeps issuing neutral signals and so the best thing to do now is to sit on the sidelines and wait for the picture to clear.

It's almost certain that the Rand is going to correct, since it has appreciated so much against the dollar. One can see by looking at the above charts that it has indeed already started to correct. This is yet another possible long term confirmation that the dollar is indeed going to mount a very significant rally in the months to come. All we need to do now, especially for futures players is to time the bottom and to do that we need more data. So we sit and wait.

Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover

Mark Twain 1835-1910, American Humorist, Writer