Graham Summers’ Free Weekly Market Forecast (Greek Bailout Round Two Edition)

As I write
this, Germany is rumored to have agreed to a second bailout for Greece (there
rumor has since been quashed). The Euro and stocks are rallying hard on the
announcement. Silver and Treasuries are down, while Gold is roughly breakeven.

The big
picture here concerns the US Dollar which had already fallen to test its
50-DMA. If the US Dollar breaks below this line and fails to reclaim it then
the US Dollar rally is over.

The
technical pattern here is a falling wedge pattern. As the below chart shows we
hit right up against upper descending trendline. We’re likely to test the lower
trendline now which is around 72 or so:

If we do
this, it will mean a test of the all-time low originally formed in July 2008.
If we take this line out, we’re into uncharted territory.

This
situation needs to be watched closely as it could very well herald the next
wave of inflation in the US. I’ve stated before I thought this latest US Dollar
rally was a dead cat bounce. That’s now looking to be case.

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Good
Investing!

Graham
Summers.

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Comments

[sellstop]

When a market comes up to a trendline it usually bounces away from it. That is because many traders and investors respect trendlines. It is still a long way to the other side of the downward channel.

Most markets take some time to break a trendline, if they do. I don't get the feeling that the USD is going to just go down from here.

At some point, if there is inflation, the Fed will have to raise rates.

If there is deflation, the dollar will gain strength.

In the meanwhile I look for the USD to define a range.

gh

gh

[Smiddywesson]

I hate to use the term "dead cat bounce" with respect to the dollar because that implies that the EUR/USD market is a market, and we all know it isn't.  I have been using the term "head fake," and I agree with you, the USD doesn't appear to want to go anywhere.  It served its purpose, squeezing shorts, hammering silver, limiting oil to $100 for a time, and keeping the coiled spring that is the gold market from exploding.