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Articles and Commentary

Trend Analysis of the US Dollar and Gold
By Chris Vermeulen
July 17, 2011


The US dollar is and has been in a strong down trend for many years and I feel as though it's getting close to another major land slide. It could take place any time in the next month or so according to my weekly chart analysis.

The general rule is if the dollar falls in value then we tend to see both stocks and commodities rise. The inverse relationship at times can be tick for tick meaning if the dollar ticks down one increment then we see the broad market or specific commodities move in the opposite direction at the same time.

Since 2009 the relationship between the dollar and investments has been so close that if you were to just focus on what the dollar was doing then you could almost trade equities and commodities without reading their charts. The dollar index chart is one of those trading tools everyone should be analyzing. At $80 a month for getting the dollar index data feed it's not a cheap trading tool.

US Dollar Index 4 Hour Candle Stick Chart:

This chart clearly shows this month's price action for the dollar which is pointing to lower prices if things play out according to the charts. This short term chart shows that in the next day or so we should see the US dollar start to sell back down.


Gold Weekly Chart:

Back in May when gold was hit with strong distribution selling I posted my thoughts on how gold could be forming a 6-12 month topping pattern and how price could get choppy. Well, we are now entering that period which could prove to be interesting.

Keep in mind this is a weekly chart and from the looks of things this top could play out for another 5-6 months from here. Silver is in much of the same predicament but trading way below its May high. I'm thinking more of a double top in silver over the next few months.



Conclusion:

I am bearish on the dollar for a week or so which should help boost stocks and commodities. After that we could see all investments make some big trend changes if buyers don't step up to the plate to buy. If we any major headline news about the sky is falling then it could trigger a sharp correction. Unfortunately, at this time head line news is running wild spooking investors from buying much of anything other than gold. Any resolution to foreign economic issues will put pressure on both gold and silver and likely help boost stocks.

The past month I have been very cautious because the market is wound up and ready to explode in either direction. During times like this I prefer to stay mostly in cash until I get low risk setups and a clear trend.

That's all for now, but if you would like to get my pre-market video analysis of the dollar index, each morning and intraday updates along with my trade alerts be sure to join my premium service at $59 a month which is less than the cost for the dollar index charting data feed! Join Now: http://www.thegoldandoilguy.com/free-preview.php.


TheGoldAndOilGuy.com is owned and run by me (Chris Vermeulen), an individual gold trading specialist. After sharing my gold analysis with friends, traders and financial advisors, I decided to make TheGoldAndOilGuy.com my full time job in 2003. This service was designed from the ground up to help individual traders who want to focus on consistent, accurate and profitable trades. Over the past ten years my strategy has been refined to one golden trading vehicle which has an almost 100% accuracy. The GLD (DGP and DZZ) gold exchange traded funds are now the most accurate trading vehicle I have seen, so it's my vehicle of choice. Members of TheGoldAndOilGuy.com not only get to trade my signals, but see my live trading charts and ask me all the questions they wish. My goal is for all of us to make money and have fun in life.


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