Tuesday, October 20, 2009

Dollar Should Bottom Soon - Rally Big

The US dollar should be nearing its bottom and undergo a major multi-month rally. Most likely this will coincide with the decline in the stock market. Primarily because as the dollar rises in value, it means you can buy more stock with less strong dollars, i.e. deflation. There are other factors in play, but that's the core.

Anyway, I'm looking at getting long the dollar and I put a small long position on the USD/CHF at 1.0110 and a stop at 0.9630. I know, wide stop loss, but it's a long term position and it's a small one. I'll add to it if it drops, and will wait for a bottom confirmation to add on rallies. Notice on the USD/CHF chart, it almost mirrors the Dollar Index chart, and it shows that wave C is ending and should lead to a monster rally. The RSI is showing a severe bullish divergence as well, so if the pair turns higher now it will confirm that sever divergence and be very bullish.

I'm also interested in shorting the GBP/USD with a stop loss at the recent swing highs (choose the recent swing high from whatever timeframe chart you prefer), because it seems possible that the GBP/USD has formed a top. The dollar bottom is not confirmed at all, but aggressive traders can possibly start getting long the dollar now, where conservative traders can wait for confirmation the dollar has bottomed.


Anonymous said...

Prechter is taking the same view. Statement out today that USD likely to rally for a couple of years as investors default on loans FYI

Todd S said...

Thanks for the info. What publication did Prechter issue that out on? His "Theorist" newsletter?