Observations, analysis & insights about markets, sectors, stocks, geopolitical issues, etc.
Tuesday, May 28, 2013
U.S. Dollar Remains Bullish
As I've written in the past, the U.S. dollar (USD) continues to look bullish.
As shown in the daily chart above, the USD is exhibiting not one but two classic bullish formations. The first (in red) is a cup-and-handle formation with a recent breakout. The second (blue circles) is a double-bottom formation with the "W" pattern occurring at the 79 level. Stepping back, the weekly chart also depicts a bullish picture.
Over the last several years, a triangle formation has been taking shape, and note that since 2011 a more acute triangle formation has developed. The breakout observed this year (red circle) is needless to say a bullish occurrence and I would expect the USD to approach its prior high of 88, established back in 2008, 2009 and 2010.
Assuming the USD remains in an uptrend, it does not bode well for commodities in general.
The weekly chart above illustrates quite clearly the inverse relationship that tends to hold over time between the USD and commodities (as represented by the CCI (Reuters-CRB Index)). The rolling 50-week correlation is consistently negative, meaning longer-term the bear market for commodities that appears to have started in 2011 is not likely to end anytime soon.