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« Why Won’t You Die, Damn it! | Main | Gold prices nudge $1250/oz, are you prepared? »
Thursday
Jun102010

Is the US Dollar Overbought?

USD Chart 10 June 2010.jpg


There are many distractions to take our eye of the US Dollar at the moment, the biggest one being the plight of the Euro closely followed by the plight of the British pound. Sooner or later the focus will return to the dollar as the investment community becomes immune to the constant stream of bad news emanating from the fatally wounded eurozone.

We could well be too early in making this call but it appears to us that the dollar may now have run its course and will now look to take a breather. As we can glean from the chart, over the last two months the Euro has been under the gun, resulting in a rally for the USD as the preferred currency. Also note the gap that is opening up between the dollar at '88' and the 200dma, which stands at '79'. The RSI, MACD and the STO are bouncing along at the top of their respective ranges and sooner or later they will return to somewhere more in the middle of their ranges. So the dollar now appears to be a tad overbought, in our humble opinion.

If we are anywhere near correct with this view and the dollar starts to correct we could see various money managers looking to lock in their current profits and place their bets in another asset class.

Three points if you can guess which one!

Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more.


Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

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Reader Comments (5)

Well you have two solid candles for two days in a row. I would see if a trend reversal results in a lower high before committing myself to a short sell on the index. I would place my buy stop at the higher high of either that day or the day before after getting a solid candle after the lower high reversed. Does that make sense?

June 10, 2010 | Unregistered CommenterDavid

As to gold, it looks like we are going to get a narrow range solid candle for today. Sellers have predominated, though I did see huge volume spikes at the lows of the day for GLD. Narrow range candles portend spikes the next day. I would not bet on the move the next day if I were bullish. Good to stay in cash.

June 10, 2010 | Unregistered CommenterDavid

Well I called the spike in gold today. I just didn't know which way the spike would go. :)

June 11, 2010 | Unregistered CommenterDavid

David,

A pal of mine has a saying:

My boat came in but I was waiting at the airport!

June 11, 2010 | Unregistered CommenterGold Prices

That's funny. :) Well, I'm going to brush up on my technique. I just bought a book by Steven Nison on Japanese Candlesticks from Amazon. I watched a DVD by Oliver Velez on swing trading. It explained a lot.

June 12, 2010 | Unregistered CommenterDavid

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