US Dollar (Finally) Starting to Show Some Signs of Life

US Dollar (Finally) Starting to Show Some Signs of Life

Well, it’s about time!

The dollar is AT LAST starting to “show some signs”, as play-by-play guy Marv Albert would say:

US dollar price chart october 2010Source:

At the beginning of this month, we listed 3 reasons the dollar was due to rally.  Reason #1 was an intermediate term trend that appeared to be heading up since 2008:

Since putting in a significant double bottom in early-mid 2008, the dollar has trended upwards.  We saw another major bottom in late 2009 (a time when pessimism on the buck was rampant – like today).  And we’re heading towards a potential bounce off that lower trendline.

This week, we did in fact see the dollar bounce emphatically off this upward sloping trendline:

US dollar weekly price chart october 2010


Since readers have been (rightfully) sending me some playful heckles that the dollar wasn’t going to rally as long as I was writing about it, I actually made it a point of laying low until we saw something new.  And this week, we finally did!

With dollar pessimism still at a bearish extreme, this rally could last far longer and go far higher than anyone is anticipating right now.  If a powerful dollar rally unfolds, we’d have to assume it’d be accompanied by a pullback in gold and silver – with silver having some significant potential downside, judging by the way it’s been slammed on these big “dollar up” days:

silver price chart october 2010Silver was going straight up – until it wasn’t, anymore.