No Relief for the US Dollar Index

Nov 7, 2007: 7:47 PM CST

Inter-market relationships are seemingly following their script. Interest rates are declining (bond prices are rising), commodities are rising, and the dollar index is declining.

There has been absolutely no relief for the US Dollar Index, and it has continued to make new lows. Today, we registered a new momentum low, which indicates slightly higher probabilities that a new price low is yet to come.

Let’s look at the chart (Daily View):

Weekly View:

Both the daily and weekly charts show extended and pronounced downtrends (lower lows and lower highs).

The orientation of the major moving averages is in a ‘total bear’ position (the 20 EMA is below the 50 and both are a comfortable distance below the 200).

The most recent ‘sell swing’ in the index has been particularly harsh, meaning a reaction up isn’t too far outside the realm of possibilities, but it would likely be a relief rally only, because the structure of the trend orientation is so biased to the downside.

Falling dollar prices are a boon to commodities, and rising commodities typically are indicative of inflation, which tends to be rather bearish for the Stock and Bond Markets, because the Federal Reserve typically acts to counter inflationary pressures by raising interest rates.

Closely watch the bond market, stock market, commodity indexes, and the US Dollar Index for potential signs and for longer term posturing (or positioning).

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