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Dollar Index Headed For Rapid Collapse: Chart
CNBC Contributor
Quantitative easing is really another word for currency wars. A weak U.S. currency puts continued pressure on the Japanese Yen, the Chinese Yuan, the South Korean Won, the Australian dollar and other currencies.
Cheap money also fuels speculation and this money quickly drifts into commodity markets and the ETFs that help propel commodity market speculation. This is inflationary for food prices.
The lower the U.S. dollar the greater the intensity of currency wars. The break below the key uptrend line on the Dollar Index chart was an early warning of the third round of quantitative easing (QE3). The most important question now is to use the chart to examine the potential downside limits of a QE3 weakened U.S. dollar.
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The U.S. Dollar Index [.DXY 78.99 
-0.02 (-0.03%) 
] is a basket of currencies. They are the Euro, yen, British Pound, Canadian dollar, Swiss Franc and Swedish Krona. The Dollar Index is used as a measure of the strength or weakness of the U.S. dollar.
There are three significant features on the weekly Dollar Index chart. The first feature is the uptrend line that started in September 2011.
One year later, in September 2012, the Dollar Index fell below this uptrend line. The weekly close below this uptrend line was the first signal of a major change in the trend direction. It came before the announcement of QE3, last week. Traders had good warning to move to the correct side of the new market trend by closing long side trades.
This advance warning was also delivered by commodity markets, as discussed last week in our column on the London Metal Exchange price moves.
That’s as far as it will go down!
Better sell your Gold and Silver while it’s still high. Otherwise soon it will be below $1000/oz.