In March of 2009, the dollar index was trading at 88-89. That was the height of the equity melt-down. Since then, the dollar index moved inversely to the equity index prices.. Our recent low at the 74 and change level marked a 9 month, 15 handle move lower. It seems that the dollar has now caught a bid.
For all the reasons out there, the charts seem to be telling us that the dollar punishment is over for now.. So now the question is how high can she bounce. I would look for the simplest of answers. Half way back brings us to the 81 level. Keep an eye on that. Its not going to happen tomorrow, but it has a good chance of pulling that retracement over the next 6 months. Of course, that would suggest that commodity prices would move lower, if that is the case, although nothing is written in stone. We are already seeing a flight from the metals and the crude oil, mostly driven by this currency play.
Again, today’s 1-month high is hardly something to get excited about if you are a bull. It may be a pause in the continuing meltdown. But if, indeed this is a major low in the index, a 50 percent bounce wouldn’t be outrageous. Certainly a nice 38 percent move is very obtainable, and would bring us back to the 79-80 level, depending on where you run the study from.
