aarc

How Low Can the Dollar Go?

Just looking at the monthly chart of Euro$ vs the US$; it is very obvious that the Euro had spend more time consolidating it's losses from the July 2008 high of 1.605 to the bottom of 1.23 last Nov 2008.

Euro has failed to even recover more than 65% of it's total losses in almost 10 months from the last bottom of 1.23. While the plunge from 1.605 to 1.23 took only 5 months to accomplish. That is a 2:1 time ratio in favor of the initial impulsive run to be sustained which is to the downside that makes it a high probability trade to short the euro dollar.

Technically, Euro has more than 65% probability of going down further. And just by using conventional technical analysis; Euro would be headed toward parity level with the US$ by early next year assuming that the second downturn takes more or less the same time as the initial plunge.

Since the Euro$ is the major counterparty to the US$, it is the primary force that had practically dictated on the day by day, week by week, and month by month, where the dollar was headed in the past and where it would be in the future.

Using the monthly chart of UUP or the ETF for the US$; UUP has also consolidated much of the gains from it's rally of July to Nov 2008 without breaking the bottom of $22. That is a very healthy sign of further upsides when UUP failed to break the bottom after going ups and downs for 10 months and should be headed toward $28 next year from the current level of $22.74.

That is where UUP is headed using simple technical analysis or conventional technical analysis with more than 65% probability.

That is where I am making my bet = on the 65% probability of success rather than the 35% probability of failure.