U.S. Dollar Near Critical Level

As 2014 winds to a close, the U.S. Dollar is near a critical level that could influence the direction of precious metals prices in 2015.

Bullion.Directory precious metals analysis 30 December, 2014
By Terry Kinder
Investor, Technical Analyst

U.S. Dollar: Since May of this year, the dollar has exploded higher. Image: pixabay

U.S. Dollar: Since May the U.S. Dollar has been on a tear, rising from under $79.00 to over $90.00 before drifting slightly lower recently.

Since May, the U.S. Dollar has been on a tear, rising from under $79.00 to over $90.00 before drifting slightly lower recently. In the chart of the U.S. Dollar above, you can see just how steep and sharp the rise in the dollar has been. Also note that the dollar is quite near the 4.236 Fibonacci Retracement Level, or $90.35. Should the U.S. Dollar manage to pierce and hold above $90.35, then the most likely outcome would be the continuation of the dollar trend higher, perhaps to $92.00 or even above $96.00. Needless to say, continued dollar strength, if it can be sustained over time, would be expected to exert downward pressure on the price of precious metals.

A Longer View of the U.S. Dollar Price Trend:

U.S. Dollar: The dollar has clearly broken above a long-term downtrend line.

As seen in the U.S. Dollar chart above, the dollar has clearly broken its long-term downtrend which dates all the way back to 1985. Each day that passes without the U.S. Dollar price falling back down to or below the long-term trend line makes it more likely that the uptrend will continue.

A Medium-Term Look at the U.S. Dollar Price Trend:

U.S. Dollar: The U.S. Dollar has clearly broken above its downtrend.

The U.S. Dollar bottomed at $70.69 back in 2008 and the DXY remained below a resistance line drawn from late 2005 for almost 9 years. That price resistance line was broken through in November of this year.

Clearly, the dollar is in an uptrend. Should the DXY be able to reach and hold above $90.35, then it appears likely the dollar will make a run at $92.00, or even above $96.00. With a higher U.S. Dollar, normally, we would expect precious metals to be pressured lower, although that isn’t always the case.

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