Weldon's Mini-Metal Monitor: U.S. Dollar - Technically Teetering...
...the U.S. Dollar, as a result of its rally, is now significantly 'over-valued' on a relative basis.
Editor's Note: This is Monday's edition of Weldon's Mini-Metal Monitor
For a variety of reasons, mostly Petro-China-Russia-ECB related, the USD is breaking down.
Note the new low in the med-term Rate-of-Change indicator and the confirmed sell-signal in the med-term Parabolic, as evidenced in the med-term technical perspective offered in the daily chart on display below.
On a longer-term basis as noted in the weekly chart seen below, we observe a bearish Moving Average dynamic, and a seemingly completed A-B-C corrective pattern to the upside.
Of course we must note that the upside correction in the Dollar FAILED to even reach the FIRST of the Fibonacci retracements (38%) relative to the entire 3-year bear market. Indeed, a one-third correction in price over one-third of the bear-move time.
Simply put … this is a VERY bearish technical pattern.
Given that on a weekly closing basis, NYMEX Crude Oil prices set a NEW ALL-TIME HIGH on Friday, and that Gold is making NEW MULTI-DECADE HIGHS on a near daily basis, we could easily suggest that the U.S. Dollar, as a result of its rally, is now significantly 'over-valued' on a relative basis.
We wonder, is the USD responding to the potential NEED for a stimulus valve amid a weakening in the macro-support for equity market reflation?
OR, is the USD decline a symptom of what ails ya, the same ailments that are threatening to inflict the equity market reflation?
Or, is the USD responding to the increased RISK of holding USD, amid an EXCESSIVE GLUT in the global supply of greenbacks?
Indeed, the evidence on the offer within today's macro-data supports the final thought process, as both posted significantly smaller than expected budget deficits for all-2005, while they rejected all bids at today's weekly T-Bill auction thanks to a near-term fiscal surplus.
Whatever the case, there is one thing that is becoming increasingly clear; there is excessive global USD liquidity, and, officialdom is threatening to INCREASE the supply!
A renewed secular bear market in the USD would only serve to solidify our bullion bullishness.
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