Dollar Breaking Out
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Back on April 12th I presented charts and a commentary entitled "Large Potential Patterns for the Euro and the Dollar". The first chart below is an update of the Euro chart. You can see how the head-and-shoulders top has been confirmed. The Euro has indeed progressed lower from the red neckline and is now beneath the 125.00 Euro/USD area. The second chart is the U.S. Dollar Index chart. Its inverted head-and-shoulders bottom pattern has now rallied through the neckline, confirming the pattern's potential. If the pattern does not fail, the Dollar should begin a substantial rally.
Additionally, notice how the Dollar has breached a resistance trend-line (in red) dating back to 2002. This observation makes the rally through the inverted head-and-shoulders neckline even more significant. When coupled, these two technical observations are a very bullish development from a chart perspective. However, as I have previously indicated in my article entitled: Two Heads are Worse than One, central banks can alter currency or economic policy at any given moment and negate even the most 'textbook' chart patterns. However, barring any significant central bank intervention, the present course would indicate continued weakness in the Euro and strength in the Dollar; and those conditions have recently been seen during stock market and commodity market weakness. Finally, please realize that both of these markets have already made substantial moves and may take a breather before resuming their trends.
Chief Investment Strategist
Preferred Planning Concepts
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