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The US Dollar has continued to rally over the past two weeks against the major currency pairs. Despite all the talk of a weak US Dollar, the greenback is staging a rally which I expect could last into the first quarter of next year. Let’s take a look at the charts of some of the major currency pairs.
In Chart 1 below, we can see that the Australian Dollar has fallen against the US Dollar (FXADUS in ProfitSource).
Chart 1
click to enlarge
While one retracement does not make a bear market, at time of writing (Wednesday November 24, 2010) the Aussie Dollar has retraced 50% of this move before falling away quite heavily – a good sign there is more downside to come.
In Chart 2 we see that the Euro has made a similar down move against the US Dollar (FXEUUS in ProfitSource).
Chart 2
click to enlarge
For the Euro, this is the largest fall we have seen since the June 2010 low. Amidst all the talk of a weak US Dollar, some of the concerns in Europe may have been overlooked. The monthly swing chart for the Euro has recently turned down and judging by the recent monthly swings, there could be an interesting couple of months ahead!
In Chart 3 we can see that the US Dollar has rallied against the Japanese Yen (FXUSJY in ProfitSource).
Chart 3
click to enlarge
Across the board we are seeing US Dollar strength and I expect this to continue into next year. We might see a stall in the US Dollar recovery just around Christmas but I expect to see US Dollar strength well into the first quarter of 2011.
After this though, we might just see this great US Dollar bear market, which has been talked about for years, actually eventuate.
Be Prepared!
Mathew Barnes
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