How to look at tomorrow's Dollar trade

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The U.S. Dollar which has been blamed for just about everything imaginable but for our purposes it has been for commodity prices and stock prices rising. We were going to say most notably Gold but we just couldn’t really justify this in our minds. Along the course of the way it has been crude oil and it’s by products, grains, soft commodities and of course the precious metals. It hasn’t hurt the stock indices either to have the lower trending Dollar.

The chart shows the continuing downward slope of the Dollar Index. Today’s low in this cash index at 74930 is but one tick below the previous low of 74940 made October 21. Coincidentally, that is the same day of the previous highs in the major stock indices prior to the Dow Jones Industrials breaking through with its sharp rise today.

Trending along with the price chart of the U.S. Dollar has been its 50 day moving average noting that for many months any rally has stopped at or near it. Likely this market will need a few closes above the 50 day ma to attract more serious buying interest.

One other note of potential significance is that the way we have constructed the Fibonacci extension on the chart we find that the target was virtually right at today’s low.

Looking at what tomorrow may bring and reasons why it may not be comfortable for short positions we find that 1.) A one tick rule with today's low one point below the previous low; 2.) The Fibonacci extension target being satisfied; 3.) Tomorrow is Tuesday.

Good trading all

Jeff
CB&S
Division of MF Global Inc.

312 261-7380

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