Wednesday, May 18, 2005

Short Term Dollar Outlook

As you know I am bullish on the US dollar. The charts you see above depict my estimates of both the long term and the short term dollar boxes in a daily continuation chart of the dollar index futures.

The first thing to note in the chart of the long term dollar boxes is that the dollar bear market ended (in my opinion) at the bottom of the fourth long term box down from the 2001 high at 121.29. These boxes are 9.94 points wide and the bottom of the fourth box was 81.53 vs. an actually low of 80.48. The market is in the process of rallying back to the top of the fourth box which stands at 91.47.

On a short term basis we see that a box of 4.98 points was established on the first extended rally from the 80.48 low. The top of this first box is 85.46 while the top of the second short term box should therefore be at 90.44.

So we conclude that the next important resistance level on the way up will be in the 90.44 to 91.47 range. The market should hesitate for few days on the way to this target when it reaches the 87.95 level which is the 1/2 point of the second short term box.

After the dollar index makes it to the 90.44 to 91.47 zone we should see a normal reaction that will probably carry down to the top of the first short term box (85.46) or the 1/2 point of the fourth long term box (86.50).

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