The dollar has broken down from a giant top area [see the 4-year chart for the U.S. Dollar Index below], and is probably headed much lower, a prospect which is not diminished by the modest countertrend rally of the past week or so.
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The dollar’s modest post breakdown rally to the underside of its Broadening Top is a typical post breakdown occurrence, and only increases downside risk by unwinding the earlier oversold condition. With its moving averages in severely bearish alignment it looks set to drop away very soon, and the decline could become precipitous. The reason for this is that a continuation of the current course, where the Fed engages in QT (Quantitative Tightening) and also raises interest rates will quickly implode the debt-wracked economy, so they are likely to abandon the proposed rates rises, unless their intention is actually to crash the markets in order that the Deep State can pin the blame on Trump. Once they abandon the rate rises, the dollar is toast.
On the 6-month chart for the dollar index below we see how the dollar rally of the past week or so has unwound the earlier oversold condition and brought it up to the resistance at two trend lines, one being the upper boundary of its recent steep downtrend, and the other being the lower boundary of the Broadening Top shown on the 4-year chart. This is a very good point for it to turn lower again.
To conclude, this looks like an excellent point to short the dollar, which is expected to drop and probably accelerate away to the downside. This should provide a boost for the Precious Metals sector which…will increasingly be seen as a safe haven.
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