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June 15, 2009 / Jeb

Important Market Update Dollar vs. Gold (Deflation vs. Inflation)

Today we all heard the news that came out of the G8 meeting speaking about the greatness of the dollar as a currency.  This was after Geithner’s trip to China to appease their fears of holding American debt.  The same people who were worried of holding America’s debt are now speaking of how great it is.

This past week I posted about the dollar floating around the 20 day moving average and how important it was to see if it could breakthrough that downward sloping moving average to the upside.  Today it did on huge volume. The dollar closed at the high of the day.

Working in technical analysis I have learned that humility and looking at charts objectively are crucial.  Being able to play both sides is essential to being successful.  Right now the dollar is rallying coming off a double bottom and is strong.  The next objective is the 50 day moving average.

UUP 6-12

This rally in the dollar may be a turning point.  The gold rally may be on hold for longer than I thought.  However, there were a few times where the dollar and gold rallied together.

GLD did not rally off the 20 day.  Even though volume is light there is not much support.  I will have to see how it interacts with the 50 day.  If it breaks the 50 and the trendline, then dollar rally will be here and deflation will start rearing its ugly head again.

UUP 6-12

Let’s not forget GLD is above the moving average so those moving averages are its support while UUP is below its moving averages so those lines acts as resistance.  GLD has a crucial week to hold that trendline and the 50 day moving average.

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