Friday, August 10, 2007

Technical Analysis of the US Dollar

If you are interested in understanding where the price of gold is headed, it is essential to always keep an eye on the US Dollar. Since the US Dollar is at a critical position, it is especially important to keep an eye on it now.

As mentioned in my previous post, the US Dollar is at a major area of support. To my disappointment, the currency has bounced off the 80 level for a second time, and I feel that this is why gold stocks struggled yesterday.

Nonetheless, most of my charts are still gold bullish, and I still feel that the 80 level will be broken soon. In my opinion, when the 80 level is broken, there may be some panic selling in the US Dollar, which may lead to some explosive moves in gold and silver.

If your thoughts are on the same lines as mine, then this next chart may be of interest to you. This chart shows a new ETF that may allow investors to capitalize on a fall of the USD:

This exchange traded fund invests in futures that are short the US Dollar against various other currencies, mostly the Euro. I really like the idea of currency ETFs, and I hope they gain popularity. One ETF that has been around for longer, and is more popular right now is the Euro Trust ETF, ticker symbol FXE.

The only issue I have with the ETF chart above is the lack of volume. Hopefully this fund will gain more popularity as time passes. More information about this fund is found here.

I should also remind you that this blog is for educational purposes only, and that there are never any certainties, only opportunities.

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