Currencies

We have been bullish the USD and bearish the Euro, Canada dollar and Aussie dollar for quite some time now, most often using this simple weekly chart of various currencies.  Months ago we noted USD creeping out of its downtrend (green dotted line) and the Euro falling out of its wedge (red dotted line).  Back then, sentiment toward the USD was far different than it is today.  So this week the Currency segment included some thoughts (and data) on USD and Euro sentiment as well.

Also of note, while the excerpt speculates that a USD reversal could trigger bounces in commodities and precious metals, these items generally remain bearish until proven otherwise.  Not the other way around.

Now everyone knows the USD is bullish and the Euro is going to hell in a hand basket.  As long as faith in paper currencies in general remains intact, I think that will be the trend.  But USD is over bought to a degree that we could actually see a significant – if temporary – reversal of these trends.

That could wake up the various commodity sectors and probably put some life in the gold sector (led by silver) as well.  At this point we are still chasing moving targets and so this is just forward-looking speculation.  But the degree to which Uncle Buck is over bought seems to be impulsive enough to prompt a strong response in the other direction if things turn around in the coming weeks.

On that note, we leave the currency segment with a view of the USD and Euro that were bearish and bullish respectively, even before the ECB officially perpetrated its latest terror operation on the Euro.  CoT data were aligned similarly pre-ECB.

USD Optix, from Sentimentrader

Euro Optix, from Sentimentrader

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