European liquidation has put upward pressure on the US dollar causing the price level to reach an extreme. While securities/currencies can become overbought while staying overbought, the recent overshoot suggests a pullback is on the horizon for the US Dollar in the coming weeks. Recent RSI readings of 70+ (overbought) have preceded a decline.
Contrarily, in September 2009 we mentioned that the dollar was oversold and a move up was on the horizon. We mentioned that such a move would put pressure on stocks and commodities. The environment seems to have reversed. If the dollar does weaken in upcoming weeks, it should be positive for stocks and commodities.
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