$USD - Very Interesting Right Now

The US Dollar right now is the center of the world! Bearishness seems to be at an ultimate extreme. Everyone keeps talking about how the dollar is doomed, how the spending in Washington is never ending, how the Fed is determined to monetize the debt (thru inflation) yet there is one glaring piece of evidence that I continue to look at and maintain contrarian and at least a little bullish...

Why is the price of the $USD not at an all time low? You would think with the demise of America as we know it that people would be dumping the dollar more than ever. But, the price today is $77.82 (up 1.61%) which is higher than last year's low after the QE1 announcement of $74 which is higher still than the 2008 low as the stock market started to tank of $71 and before all QE. That is still over 10% away from where we are now. That is a HUGE percent in the largest market in the world (currency).

From a charting perspective we are at a very interesting point. There looks to be a potential triangle forming (which would be longer term bearish) but there are issues with that triangle. There are 5 wave moves within the triangle, which is typically a no no. Plus the extreme bearishness isn't indicative of another move in the same direction. However if this is a triangle the final E move up of the A-B-C-D-E pattern should last at least a few months which will likely ease any bearishness. There also exists a potential that the move down from June is impulsive and that high was the top of a corrective flat pattern except there exists structural issues with that pattern as well (no new low at the end of 09, for one).

The other side of the coin has this baby in a potential bull move. The rising trend from the 08 low is still in tact and if nothing else we should get a bounce here (which looks to be already occurring). The final key to this would be to take out the 09 high of $90. If that happens, jump on the rally.

How we know where to place our bets...
1) If the price exceeds $90 then the triangle is invalid and the wave count I have labeled is the most likely (3rd wave beginning now).
2) If price drops below the triangle and breaks $74 then the likelihood is that the triangle (or flat correction counts) were correct and we should see new lows (potentially a huge move down if the triangle measurement is confirmed -19 points from the breakout point which will put the dollar in the 50's).
3) In the meantime, prices are rallying, this is either the E wave of the triangle, the 2 wave of the new move down (flat correction), or the mega 3rd wave of the new bull market that started in early 2008.

This chart is so important because the dollar is involved in all asset classes. Stocks, Bonds, and Commodities all have dollar denominators. So, if the dollar rallies, expect stocks and commodities to fall (especially commodities) ceterus paribus. The dollar is the daddy and leads all other asset tops and bottoms. It also trumps all the other markets in the world. People need to remember that the dollar is 100% RELATIVE in a fiat currency world. It will go up in price if it is better than the alternative (Europe, England, Japan, other major nations). So it can be easy to justify a dollar rally, especially if Europe continues to have problems and Japan decides the Yen is way too strong (which Im sure they already are saying).

Good Luck. This chart is very important and will be very telling.