How Low Can You Go?

I know what you are thinking when looking at that Dollar chart:

How low low can you go?

Alright, time to look at our trusty DXY RLs – again, brought to you courtesy of retracementlevels.com.

If you look at the chart on the very top it’s quite clear that the Dollar will most likely run into long term support around the 73.5 – 74.5 cluster (highlighted area) which goes back to early 2008. Which is why I set the 100% RL to 73.88. According to 2sweeties fib retracements the prior line of defense is right now and right here at 74.55 – the odds are above 90%, quite high I must say.

In terms of historic frequency the 74.55 level actually has the higher frequency – unfortunately we already busted through a whole cluster of gorgeous RLs in the past week (cough – currency manipulation – cough!).

So, I’d venture to say that Dollar bulls should start adding long positions right here and right now. Yes, we might drop to 73.88 and perhaps even 72.78, but Ben Bernanke and his Dollar hating cronies notwithstanding, nothing goes down forever. Plus, if we drop through this last cluster of support we are basically talking major currency crisis, and at that point it really doesn’t matter if you’re a bull or bear anymore as this country would go to shit in a hand basket.

Cheers,

Mole

This entry was posted on Wednesday, November 25th, 2009 at 1:37 pm and is filed under Currencies, Market Outlook, Retracement Levels. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.