Dollar, Be Nimble
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I occasionally read how the Euro is about to stage a substantial rally against the pathetic Dollar. Yet the Euro/USD continues lower, and the Dollar Index continues to rally from its inverted head-and-shoulders bottom pattern, seen below. On the other hand, let me show you why the pathetic Euro chart implies further weakness (second chart below).
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Notice, in the chart below, the firmly entrenched downward trend-channel that has formed since the Euro's 2008 market peak. Next notice the 11-year bullish trend-line (e.g. dating back to 2001) that has been breached this year during this current Euro break; and the downward breaching of the smaller bullish trend-channel formation that had formed during the Euro's last cyclical rally (e.g. 2010-2011). Finally, observe the head-and-shoulders top formation, with neckline depicted in white, that is also currently in play. That's 4 textbook bearish chart formations in play, all in the same market. The current Euro chart is a veritable bearish chart pattern medley!
Click for a larger image
As I often mention, central banks can come in at any moment, upset the policy apple cart, and at the very least momentarily change market trends. But when considering this chart and barring any significant central bank policy changes, the Euro seems in trouble to me; while the U.S. Dollar seems poised to rally.
A parody of a nursery rhyme came to mind:
Dollar, be nimble.|
Dollar, be quick.
Dollar, jump over
The Dollar may eventually burn its toe, but maybe not for a while.
Chief Investment Strategist
Preferred Planning Concepts
2800 S. River Road # 240
Des Plaines, IL 60018
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