US Dollar Breakout: How Far Will It Run?

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Commodity Trading Research US Dollar Breakout: How Far Will It Run?

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Hi, My name is Justin and I‘m with Commodity Trading Research, today were reviewing our recently published article…

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US Dollar Breakout: How Far Will It Run?

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Something very important happened the past few days… The US Dollar rallied above the important resistance trendline. I pointed out a few weeks ago. Here’s an updated chart…

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As you can see, the greenback rallied strongly off technical support at $94 (red line) in mid-October. The bullish momentum is carrying the currency above (green circle) the downtrend line (green line) from the early 2015 highs.

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Without question, we have a US Dollar breakout on our hands.

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What’s sending the greenback higher?

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Last week’s FOMC meeting revealed the US central bank is closer to hiking interest than many analysts and economists had expected.

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Decidedly hawkish adjustments to the Fed policy statement has investors rushing into the world’s reserve currency.

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According to Fed Chairwoman Janet Yellen a rate hike may come as early as the next FOMC meeting on December 16th, 2015.

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What’s this Dollar rally mean for commodities?

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As you’re likely aware, the precious metals space has already had the spots knocked out of it the past few days. Gold is down $73 an ounce (-6%) from the intraday high on the day of the FOMC

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announcement, while silver has plunged just over $1 (-7.5%). Given the recent price action in precious metals, it’s not hard to figure out the impact of a rising dollar on commodities. Here’s the deal…

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Should the US Dollar continue rallying in coming months assets like gold, silver, platinum, palladium, and crude oil, will face continuedopposition to higher prices.

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But there is a caveat…

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Should we see an unexpectedly bad economic data point this month or next, the US Dollar breakout could fail. And as you may know, a failed breakout can cause a violent price reaction in the opposite direction.

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In other words, a break below the red line in the chart above is still possible. Here’s where it gets very interesting…

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In an appearance before a House of Representatives committee yesterday, Janet Yellen said the Fed would consider negative interest rates should the US economy “deteriorate in a significant way.”

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Folks, if anything’s capable of sending the US Dollar sharply lower- that’s it. Bottom line… Economic data over the next few weeks will give essential clues to whether the Fed will raise rates in December or not.

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But no matter what the Fed has in store for us, commodity investors should be monitoring the US Dollar chart closely.

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