Buying the Dollar

Ever since this bear market started the fundamental opinion of many is that the dollar will die. Somehow the charts are still not in agreement longer term. Since May 2008 the dollar index started strengthening and completed a five wave rally in March 2009. Since then it has now retraced 61.8% [78.26] of its gains in an w-x-y-x-z decline and the RSI is making higher bottoms, while the price has made a double bottom. Prices are also at their 20 months average. So as long as 78.26 is not broken assume that wave 3 of a rising trend for the dollar should start from here. Since most asset classes have been rising against the dollar a rising dollar should affect every asset class. In terms of targets lets look at the next chart.

The weekly chart below covers a larger time from since 2001. In this wave 1=3 for the rise since last year would target 100 for the dollar index in the coming year. This should also take us to the upper channel line of the rise. In terms of pattern the Dollar index has completed a right shoulder in a large H&S formation with 2008 being the head and 2005 the left shoulder. The breakout from the neckline of the pattern would be at 89 which would target 113. In terms of supports and resistances to watch the month 20ma is at 79.11 40ema at 82.27, on the weekly charts the 40ema is at 82.86. So on the downside 79 appears like a strong support area that should hold for this view and 82-83 the key resistance which once crossed would confirm this move further.