I have some new information on the US Dollar index and wanted to bring it to your attention. My obsession with the US Dollar Index continues… But why? Why am I so obsessed with the US Dollar Index. I am because it is either going to help gold do a MEGA breakout or it could potentially hinder any breakout in gold or even cause a break down.
I just wrote a post on the negative seasonals that are kicking in for the US Dollar Index starting right now. But I only just now discovered a new perspective on the US Dollar Index that is giving me a little extra dose of confidence that we could see the US Dollar break down severely in September and subsequently cause the gold price to spike to a new all time 30 + year high.
The chart above (click on it for full size) is a MONTHLY US dollar index chart, so clearly we are talking larger time frame here. It takes a whole month for a new price bar.
There are a few important observations to note from this chart. First, that the US Dollar Index is still sitting right on a signficant support area of the 79 level that goes back many years. Second, the US Dollar Index is perched right on the blue up trendline support, therefore it is critical for the US dollar to hold this level for the upside bullish case to remain intact.
Lastly, and this is the most critical point, the MONTHLY MACD is just about to do a bearish downside crossover. This bearish downside monthly crossover should be activated upon the transition from the month of August to the month of September which is only 9 trading days away !!
This is similar to the forecasting method I used to help me pinpoint the ‘great crash of 2008’ that occurred in the broad market during October 2008.
If the US dollar Index fails to hold up trendline support and breaks down below this trendline then it implies a move to 70 to 72 level in my opinion.
I realize I am putting my finger on the chopping block here but I have to make a call at some point. I cannot just keep wavering around and staying in neutral territory.
Making the call the the US Dollar will break down below the supporting up trendline is not usually well advised for the simple reason that the market has not spoken yet. But I am putting my finger on the chopping block because I believe the monthly macd will lead the way for us here.
A few heavy hitters (whom I have great respect for by the way) of finance and technical analysis are calling for a big US Dollar bounce (Bob Prechter, James Mound and Marc Faber).
But I think we get a break down in September and a violation of that blue up trendline.
So there you have it, my finger on the chopping block, now lets roll!