What will markets do if dollar is truly bottoming?

In 2008 when the dollar bottomed we saw some dramatic changes in many other markets.

Currently the dollar is appearing to make another effort at a bottom but first let’s check that possibility.

In 2008 the dollar was trading around 73.000 while now it is around 80.950. In 2008 it had been selling off for almost three years straight which entitles any market to a rally. This time the dollar has been selling off for approximately a year only, and a good part has been consolidation. So what makes the potential for a rally possible this time around?

As I have pointed out many times, the negative fundamentals that have been rampant for some time do not seem to phase the dollar for long. There is an old saying amongst brokers, “if a market ignores fundamentals, watch out.” That means something else is influencing it and it will do the opposite.

So what else could be influencing it fundamentally? From what I have read the strife throughout the world is driving money to the dollar (as well as our stock market) because we are the last safe haven out there and that could be the driving force behind its stubbornness in holding.

But back to the technical situation. That is different versus 2008 in that it could be more supportive today for a rally versus then.

Take the monthly chart. In 2008 when the dollar consolidated and broke out, it had the 20, 10 & 100 ma looming above it. They are resistance. Today, while still consolidating it is already over the 100 and 10 ma and is pushing up against the 20 ma.So it has yet to break out and it already has the 100 and 10 ma as support, not resistance.And all three of those averages are merging together and that can indicate a breakout in any market.They did not merge in 2008.

Take the weekly chart.In 2008 the dollar broke out from consolidation over the 20 & 10 ma and later the 100 & 200 movign average. This time the 200 ma is under the market and has been support--the complete opposite of 2008.It has already broken out over the 20 & 10 ma and is now over the 100 ma.In other words this time around it has all these averages as potential support which was not the case in 2008. So technically that creates potential for more follow through to the upside in any market.In 2008 the dollar had consolidated four months before taking off.This time it has been consolidating ten months.So if this potential follows through, the dollar could go a lot higher than it did in 2008-2009 when it peaked at 89.710.And what would this do to other markets? 

 

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