The Dollar is not dead, nor is it dying. This flies in the face of expert opinion as well as that of the general investing public. It also flies in the face of Candlestick and Candelaabra Reversal Patterns which have proven reliable over decades of observation. Even the most well-heeled investors, whose names are instantly recognizable worldwide, remain convinced that there is nowhere for the Dollar to go except Down, and they have put big money on the line. They, together with large funds, sophisticated investors, and the man-in-the-street have now had a “first taste” of the losses which they will suffer if they persist in that opinion.
One of the classic evidences that “The Dollar Is Dead” is wrong is that so many people believe it, to the point where opinion is so heavily tilted to one side that the percentage rides in the high nineties. In the aggregate, economists are usually wrong, for starters. Further, it is well-understood that when opinion in matters of finance is overwhelmingly in one direction, that opinion is usually wrong, too.
Contrary to expectation, the Euro has declined (as against the Dollar) about seven cents since December 3, 2009, a day which marked the end of a long ascent and pattern evidences of the need for upward price pressure to be relieved. The tipoff for an immediate price decline in the Euro came on that day with the emergence of a Candlestick “Shooting Star” price bar, which is bearish. The Candelaabra patterns supported this evidence of bearishness, as well; whereupon the Euro declined to a low of $1.4261 on December 18.
Now the tables are reversed: Candlestick and Candelaabra patterns show a very large buildup of pressure underneath Euro prices, which will inevitably push them up. We think that the Low in prices which is now forming is the termination point of the first leg Down in a substantial and persistent decline in the Euro. This downleg will be interpreted by many as a “correction” in an underlying bull trend; but we think to the contrary.
Nevertheless, the imminent bounce must be dealt with first. It is the bounce which will be the “correction.” A partial upward retracement of the downleg which is now ending could be expected to drive the Euro to anywhere between $1.46 and $1.4950 before petering out and reversing.
Wherever the top may come, it will likely be marked by another set of Candlestick and Candelaabra Reversal Patterns, bearish this time; and the downmove to follow, being a probable “third wave down,” will very likely drive the Euro to well below $1.24 – and eventually the Euro will trade below $1.14.
December 21, 2009