Once again, the U.S. dollar looks ready to make a major move.
I turned bearish on the buck last September. The daily chart of the dollar looked vulnerable to a sharp move lower. So, that made me bullish on assets that typically move opposite the buck – like gold and the Chinese yuan.
Since then, gold is up more than $100 per ounce. And the Chinese yuan (CYB) is about 4% higher.
Funny thing, though… the U.S. Dollar Index ($USD) is still trading at just about the same level it was at last September. Oh sure, the buck has been a little higher and a little bit lower. But, it really hasn’t done anything for the past four months.
That could change today.
The daily chart of the buck looks poised to make a big move, one way or the other, following the Federal Open Market Committee (FOMC) announcement this afternoon.
Take a look…
After running as high as 97.20 in early December, USD has endured a series of lower highs and lower lows. The dollar has also broken below the support of its 50-day moving average (MA) line – which shifts the intermediate-term trend to bearish. Now, all of the various moving averages are in a bearish configuration – the 9-day exponential moving average (EMA) is below the 20-day EMA, which is below the 50-day MA.
The last time the chart of the dollar looked like this was last September, just before the buck dropped 3% in about two weeks. That was right about the same time gold and the yuan started to rally.
Notice, though, how the dollar index hit a low of about 94.70 earlier this month and has bounced back a bit since then. That bounce brought USD all the way back up to “kiss” its 50-day moving average line from below. This is a logical resistance area and a low-risk spot for traders to put on a short position and bet that the buck is headed lower.
If resistance holds and the dollar starts to fall, then it should make a lower low – below the 94.70 level from earlier this month. On the other hand, if the buck breaks out above its 50-day MA, then the intermediate-term trend will have changed back to bullish. Traders can close their short position for a small loss.
Either way, it looks to me like this chart is ready to break in one direction or the other sometime soon – perhaps following the FOMC announcement later this afternoon. Based on the recent rally in gold and the Chinese yuan – which seems to be anticipating a lower dollar – I think the odds favor the dollar bears in this scenario.
Best regards and good trading,
P.S. Like I said above, I see some immediate action happening with the buck. But, the long-term market outlook is a different story…
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In today’s mailbag, one subscriber shares a successful trade…
I just wanted to report that I was able to get in on [a recent recommendation] and closed it today… The Mastermind training is definitely working in good combination with my Delta Report subscription…
I ended up with a very nice $1,000 gain in return for having some money committed to the trade for a couple of days. By way of comparison, I started my work life as an Emergency Medical Technician making $1.90 per hour and was only paid for 13 hours of each 24-hour shift.
So, what I earned with this trade would have required 40 days of 24-hour shifts. Now, to be fair, we have had some inflation since then…
However, this is a much better way to make money and at the end of the day, I smell better…
Thanks for all you do! One more gain like that and I will have already recovered the full cost of the Mastermind series and I know it will continue to benefit me, and those who depend on me, long after the series is complete.
How are you preparing for the coming market crash that Jeff’s been talking about? Do you have a plan in place?
And as always, send any other trading questions, suggestions, or stories to [email protected].