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US Dollar rally prompting bearish roar

|Includes:DUG, EUO, GLD, SLV, USO, PowerShares DB USD Bull ETF (UUP)

The US Dollar is posting a ferocious rally today.  Its rival, the Euro, is finally breaking down from a “flag” pattern that many, including the esteemed Chris Kimble, have noted.

A Euro selloff / US Dollar rally has gone hand-in-hand with “risk off” for years.  The most obviously vulnerable to sector to a sizeable US Dollar rally would be commodities.  Both gold and silver have rallied up to their falling trendline resistance.  GLD, which has been in a rising channel since early 2009, recently broke to the downside of a small wedge and has rallied to test its underside as resistance in recent days.

Silver has also rallied to test resistance:

Like Gold, crude oil has been in a rising channel since 2009.  It broke under the bottom of the channel a few weeks ago, only to rally ferociously.  Now, it is re-testing that bottom channel support.  On one hand it looks like a decent spot to get long with a tight stop… but it seems more logical that the apparent US Dollar rally will re-ignite oil price weakness.

 

Continue to watch the USD/Euro, as a continued Dollar rally is likely to have a negative impact on most if not all “risk-on” assets.  And, pending follow-through tomorrow, it sure looks like the US Dollar is ready to breakout to the upside.

I am long EUO, DUG, DEE, AGA.

Stocks: UUP, EUO, GLD, SLV, USO, DUG