BarroMetics Views: The US$
The US dollar holds the key to Gold and Crude. Both have rallied on the back of current dollar weakness. Let’s look at Crude first.
Figure 1 shows the bullish case. We see a possible Failed Upthrust Change In Trend Pattern. This would suggest a strong upside breakout. Figure 2 shows the bearish case: Crude is in the process of forming a complex Head and Shoulders change in trend. At this stage either or neither may happen.
Figure 3 is the US dollar. We see that it recently broke support at 78.14. Note that this was a breakout from a range that spanned from Nov 1998 to June 2009. I would have been looking for an increase in range on the breakout. Instead we see that the Average True Range dropped to 130 from 230 just before the breakout. Indeed until we accepted below the Maximum Extension I was looking for a possible Negative Development Buy.
But there is another consideration….
….The Nov 1998 to June 2009 represented a period of a high volatility. So it is possible that the current low volatility is a reaction to that.
So at the moment I’d have to say that the DX is not providing any definitive clues. Stay tuned.
FIGURE 1 Crude Oil Bullish
FIGURE 2 Crude Oil Bearish
FIGURE 3 DX