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Top trader: Why the dollar is headed lower

From Jeff Clark, Editor, Delta Report:

The buck has been struggling since early November.

The last time we took a look at it, we were willing to give the dollar the benefit of the doubt. On the chart, the US Dollar Index ($USD) had violated its pattern of higher highs and higher lows. But it was still trading above its 50-day moving average (MA). The momentum was still leaning bullish. And the buck looked to be setting up for a bounce.

That bounce ended abruptly yesterday.

The dollar fell 0.69% yesterday. That’s a BIG one-day move for a currency. It closed below its 50-day MA.

The dollar has formed a “lower high” on the chart. And there’s an even more bearish pattern developing. Take a look…

This chart is forming a “head and shoulders” pattern. This is a bearish formation that usually indicates the reversal of an intermediate-term bullish trend to an intermediate-term bearish trend.

The neckline, marked with the red line at $93, is critical support for $USD right here. If the buck breaks below that level, then the targeted move (which is the distance between the neckline and the top of the head) is a drop of another $2. That will bring September’s low of $91 back into play.

Of course, this chart is important to gold traders, too.

Gold and the dollar tend to move in opposite directions. So, if the dollar breaks down from here, then the next few weeks could be bullish for gold.

Traders should keep an eye on the $USD chart and the $93 level in particular. A close below that level should lead to more selling pressure on the buck – and more buying pressure for gold.

Best regards and good trading,

Jeff Clark

P.S. Just yesterday, I recommended a gold stock option trade to my Delta Report subscribers. A trade like that, in this market… well, it’s contrarian to say the least.

But that’s what we do in the Delta Report. We make low-risk trades in contrarian sectors, and lock in triple-digit returns while Wall Street chases the market ever higher.

To learn more about a subscription to the Delta Report, click here.

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