The US dollar has accelerated lower and precious metals have been a clear beneficiary.
MINYANVILLE ORIGINAL The US Dollar Index has accelerated lower after breaking the 200-day moving average on September 7, and it seems from the recent Fed outlook that the trend lower should continue. Unfortunately, the market is proving my view of a longer term bull market in the US dollar to be incorrect. While this could be another shake-out, we must manage risk; therefore, I would use any bounces in the DX to reduce long US dollar exposure. The upside should remain limited above 80 as the 200-day moving average will now provide heavy resistance on any rallies above that level. Don't fight the Fed!
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The euro has benefitted from the USD weakness, and has now broken through heavy resistance in the 1.25-1.30 range. Of course, this doesn't make a lot of fundamental sense, which is why the markets can be so hard to trade! It looks to me like the 200-day moving average will now provide support for the euro on any pullbacks below the 1.30 level. Longer term, I continue to think that the euro will trade lower, but this is not a time to fight the market, and we must manage risk.
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Precious metals have been a clear beneficiary of the weak US dollar recently, and all these markets have accelerated higher after breaking 200-day moving average resistance. Of course, the recent Fed outlook has provided a nice bid as well. While most of the metals are too extended for fresh money near term, I think these will provide good buying opportunities if we see a sharp pullback. Time will tell if we see any weakness, but I think it is worth keeping these on your radar to buy if they really get hit hard. See the chart below of the SPDR Gold Trust ETF (GLD), and it certainly looks to me like $160 is support!
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