Potential Breakdown in the US Dollar Could Spark Explosive Rallies in Commodities & Precious Metals In 2016

The US Dollar Index has experienced a violent rejection following the failed attempt to break out to new highs, which is likely to have longer-term bearish implications for the $USD. Should the US Dollar Index ($USD/$DXY) ultimately go on to break down below the base of this Double Top Reversal Pattern in the coming months, the measured move for the pattern would project for a move down towards the 86ish level. Such a drop in the dollar would likely ignite an explosive rally in the beaten-down dollar sensitive assets such as commodities and precious metals.

$DXY daily Dec 3rd

$DXY daily Dec 3rd

There's still plenty of work to be done as the US Dollar index is only about a day or so off mutli-year highs but this pattern is definitely worth monitoring as the well-defined support around the 93 level makes this a very "clean" double-top pattern and with the long $USD/short $EUR trade being dangerously one-sided, not to mention the fact a solid technical case that can be made for a top in the US Dollar index, a move down towards the bottom of the pattern could come sooner than most expect.

Dec 3, 2015 3:38pm|Categories: Gold & Commodities|Tags: , , , , |4 Comments


  1. HiddenPivots December 3, 2015 3:44 pm at 3:44 pm

    Randy, Busy with family in hospital still.. But I been reading your tweets and staying up to date.. Thanks for that!!
    Nice day so far, all chips are falling in place.
    Looking forward to coming back and posting charts etc…
    Thanks as always!


  2. rsotc December 3, 2015 3:49 pm at 3:49 pm

    @hiddenpivots I wasn’t aware, hope everything is ok. Family comes first. Certainly an interesting day in the market but the next big day or trade is always just around the corner. Best regards. -RP


  3. RickySixx6 December 3, 2015 8:13 pm at 8:13 pm

    Agree and thus no surprise hearing that from me Randy, as I think the Dec Hike/No Hike will be the trigger. With that said, boy was I disappointed in the tepid Miner “bump today compared to the dramatic drop in the dollar. Similar dollar drops in the past have resulted in 15-20% moves in NUGT vs. today’s 5.63% rise.


  4. rsotc December 3, 2015 9:19 pm at 9:19 pm

    The Dec FOMC decision may well be the catalyst that sparks a major rally in the metals/miners but regarding today, one thing that I learned long ago was that ‘one day does not make a trend’. In other words, I never try to draw too much from a single day’s price action, other than a solid breakout of a technical pattern.
    Short-term disconnects between well known correlations, such as the dollar & gold, can last for days & even weeks at times. Typically, the larger the disconnect, the more powerful the mean reversion when it finally comes.
    My guess is the gold’s lack of reaction to the big drop in the dollar today was largely due to the street as dismissing the drop in the dollar as fleeting short-squeeze in what is arguably one of the most crowded trades in recent history. Should the dollar regain those losses soon & go on to take out the March highs, reality will most likely set in & we could see a continued rush for the exits in the very crowded short Euro/long Dollar/short PM & commodities trade. Can’t bet it too hard yet but short equities, long miners & ready to add to those trade but only on strength (i.e.- averaging up on the miners/down on the equity shorts).


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