U.S. dollar Index futures (DX) traded at ICE Futures U.S. (the former New York Board of Trade) closed at 76.79 on Monday, 1.58% below the close on the previous Monday. At the same time both Nymex Crude Oil futures and the Knight Ridder Gold composite (GOLD_SPOT) made strong gains, rising 8.73% and 4.97% to close Monday at $93.53 per barrel and $791.5 per ounce respectively.
According to the MIM, when we see such a rapid rise in gold and crude oil futures prices, the U.S. dollar index has typically declined across the following three weeks, representing a general weakening of the U.S. dollar relative to its trading partners.
Q: What happens to U.S. Dollar Index futures when gold and crude oil futures rise more than 4% and 8% respectively over a five-day day period?
A: According to the eight previous occurrences of this event, EventEdge indicates that the dollar index has shown a very strong bearish edge that peaks 16 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Monday, Oct. 29, 2007) is Tuesday, Nov. 20, 2007. The dollar index declines in 100% of the cases by an average of 2.2% relative to the close on the event date. The overall return of the eight cases is -2.2%, which, based on the close on the event date (76.79), provides a target price of 75.101.
If you would like to see more details of this historical edge, go to www.markethistory.com
Scott Murani covers European energy and commodity markets from London.
