How do the metals drive the Dollar?

Jan. 14, 2011 - PRLog -- The U.S. Dollar Index Futures have been sold heavily and interestingly enough, gold and silver have not rallied. In fact, gold and silver have sold off while the dollar experienced downward price action as well. How does that whole scenario make any sense? I do not fancy myself as an expert in the area of reasoning why a stock or commodity rises or falls. I firmly believe that the media is nearly always wrong as to the real reasons stocks and commodities are rallying or falling.

I believe that the market is a giant discounting mechanism. The market discounts news, political variables, and the future supposedly. It is hard to know if the future is actually priced in, but the experts say that it is as do the academics, therefore we might as well consider it fact else be thrown to the proverbial wolves. The point in all of this is that I have no earthly idea why the U.S. Dollar, gold, and silver were all sold on Thursday. I would also point out that light sweet crude oil futures closed the day lower.

I can’t believe I am about to say this, but I believe the U.S. Dollar Index may be setting up to rally here. If we take a look at the daily chart of the U.S. Dollar Index Futures we can see that the dollar has been under serious selling pressure accompanied with high volume. However the price action represented on the chart below illustrates that support is located around its 50 period moving average. It might take several days before the U.S. Dollar forms a bottom, but should it start to rally it may attempt to break out over recent highs.

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