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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…
US Dollar Breakout: How Far Will It Run?
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.
Without question, we have a US Dollar breakout on our hands.
What’s sending the greenback higher?
Last week’s FOMC meeting revealed the US central bank is closer to hiking interest than many analysts and economists had expected.
Decidedly hawkish adjustments to the Fed policy statement has investors rushing into the world’s reserve currency.
According to Fed Chairwoman Janet Yellen a rate hike may come as early as the next FOMC meeting on December 16th, 2015.
What’s this Dollar rally mean for commodities?
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
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…
Should the US Dollar continue rallying in coming months assets like gold, silver, platinum, palladium, and crude oil, will face continuedopposition to higher prices.
But there is a caveat…
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.
In other words, a break below the red line in the chart above is still possible. Here’s where it gets very interesting…
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.”
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.
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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