The US Gangs Up On Its Own Currency…Or Does it?

February 3, 2018
The US Dollar Index had an opportunity to generate a double bottom as it tested the September lows early in January. However, the bounce could not take out even the nearest of overhead resistance at 92.50 or approach the 93.50 level that was needed to show signs of strength and a Change of Character. The break to new lows was coupled with a blunt US Treasury Secretary’s
advocacy of a weak dollar, but then a reversal on Trump’s comments on Thursday. While the daily chart is getting back into an oversold position, there is now a massive overhead pattern dating back over the last three years. For now, it would take an almost immediate rally back through 91.50 to reverse the downtrend.
 

CHARTWORKS – 1/26/2018 2

The reciprocal action to the Dollar has been the strength in most commodities. It has helped fuel the seasonal rally in gold which is now in its 29th trading day. As stated in our January 8th report, when the seasonal strength did occur “the average rally lasted 44 trading days and produced a series of RSI(14) readings over 70. The shortest rally was 23 days and the longest was 64. Most tops exhibited a bearish divergence in the RSI.” There have been three pushes to 70 in the RSI (currently 75), but no divergence.

There can be no doubt that the depth and width of the consolidation under $1400 since 2013 can be used to provide significant measured potential on the upside and we are beginning to hear calls for all-time highs. Our preference is to monitor the various swings as they evolve. It is time to raise the stops. We now view $1334 (the midpoint of the January 16th to 24th pause in the uptrend) as an appropriate stop for speculative long positions.

Opinions in this report are solely those of the author. The information herein was obtained from various sources; however, we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.

Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.

BOB HOYE, INSTITUTIONAL ADVISORS

EMAIL bhoye.institutionaladvisors@telus.net

WEBSITE www.institutionaladvisors.com

Bob Hoye is the chief financial strategist of Institutional Advisers.

Due primarily to the California Gold Rush, San Francisco’s population exploded from 1,000 to 100,000 in only two years.