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Dollar: Small Pull Back Likely, But Bottom In



May 09, 2011 – Comments (0)

The Dollar has ripped higher over the last three trading sessions. This dramatic move has signaled a bottom in the near term. This now means pull backs in the Dollar can be bought and bounces on the Euro can be shorted.  The PowerShares DB US Dollar Index Bullish (NYSE:UUP) has jumped from $20.84 last Wednesday to a high today of $21.55. This is a monstrous move for any currency and must be respected. In response, the Euro has collapsed with the CurrencyShares Euro Trust (NYSE:FXE) dropping from $148.81 to a low today of $142.01.

In the next few days, expect a pull back in the Dollar and a bounce in the Euro. The Dollar is into major resistance with the 50 moving average on the daily chart. In addition, this is a three day move and this mega move is notorious for a pull back. In addition, the FXE hit the 50 moving average on the daily chart and this signals a coming bounce in the Euro.

After this pull back in the Dollar, the Dollar can be bought. In addition, on any solid bounce, the Euro can be shorted. This is simply because a pivot bottom has been put in on the Dollar and a pivot top is now in on the Euro. The reversals in each chart have begun.

Gareth Soloway

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