Huge Potential Decline For US Dollar Bodes Well For Risk Assets

The fact that the US Dollar Index has formed a potentially bearish medium-term double top bodes well for commodity prices as well as other US Dollar denominated assets such as gold and US equities.

As this chart shows, the US Dollar Index has formed a potentially bearish technical pattern known as a Double Top Reversal pattern. If the pattern completes, i.e. the dollar index breaks down through support at 74.72 in a convincing manner, then we can expect the dollar to fall to around 69.60.

Chart courtesy of Stockcharts.com

If this bearish scenario does play out, and certainly momentum is now to the downside, then this would prove very bullish for those assets denominated in US Dollars, such as commodities, gold and silver, and US equities.

 

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