Simit Patel

Over the past couple months, we've seen the EURUSD fall by 2,000 pips -- a large move by any standard.

This, coupled with gold hovering near a three year support line and crude oil testing the psychological support level of $100, begs the question: are we seeing a major reversal of sorts, away from the falling dollar/rising commodities that we've been seeing for the past few years?

Well, as I noted in my post on Fannie and Freddie, I don't think that is the case. If anything, I'd be inclined to argue the fundamentals are strengthening the trend in the opposite direction, towards a weaker dollar and stronger commodities.

But I am a trader, and a technical one, so let us see what the chart tells us.

The chart below is a monthly chart of the EURUSD. I selected a monthly chart that covers the past seven years to see the big picture on the dollar's drop, which fuels much of the rise in commodities.


A few things to note:

1. I love to use moving averages to gauge trend reversals. It is interesting to note that the 5 EMA has crossed the 10 EMA on the monthly chart -- though the 10 is still above the 20, which is above the 50, which is above the 100. Strictly from a technical standpoint, I would prefer to see the 10 cross the 20 before thinking the dollar decline is over. Though it clearly looks as though we may be headed in that direction.

2. 3850 is a major support level, as David noted in his recent analysis. Note that this is coinciding with gold testing a three year support level and crude oil testing the key psychological level of $100. Technically speaking, it looks as though we are at a key point.

As a technical trader, I don't believe in trying to predict the market, I let the charts tell me what to do. I'm short EURUSD now, and I won't be exiting until I see the moving averages start to reverse their trend on the daily chart.

What are others saying? Check out the links below to find out.

Gold Support at $790 Holds for Third Time - Buy with Both Hands
Fundamentals Mean Gold Won’t Fall Much Further
US Dollar rallies as government takes control of Fannie Mae & Freddie Mac (expects a retracement followed by continuation of dollar rally)
RGE - Is there an oil price floor and where is it? (forsees oil's price floor being around $80)

What do you think? Have any questions? Drop 'em in the comments below.