This week’s Chart of the Week features the US Dollar Index as it has risen off its recent low at 91.01. After collapsing from recent highs near 104, DXY appears to have broken above its downtrend line. However, in this case it appears that this break out is a “head fake” and DXY is ready to make another major move lower to 88-89. Once DXY breaks below 92.90, we are looking for a move down to 92.07 which was a recent level of support as indicated in the chart above. We then see 92.07 being broken and a test of the recent low at 91.01 as the final check point before our 88-89 target. The other tool we are using this week is a price oscillator (PO) which is suggesting that this bounce is a “head fake.” We recently saw the PO cross above 0 and this is something that we saw multiple times this year. However, every time that the PO crossed above 0 this year (six times), DXY reversed after experiencing a bounce. The same setup appears to be the case for the most recent bounce in DXY and the index is preparing for its next major move lower which should begin this week. The PO should be heading back to its lows near -0.8 before a bottoming of DXY.
What this means for metals is great news and gold/silver should be heading much higher very soon.
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