I wrote a post last weekend about GBPUSD, and mentioned at the end of that post, which you can see here, that while USD had not reached my ideal channel retracement target, it might nonetheless be starting to reverse back up to complete the giant IHS forming on it. Since then the declining resistance trendline I highlighted has broken up and retested, and USD is showing what looks likely to be either a double-bottom, if it breaks up here, or the left shoulder and head of a small IHS, if it reverses here. Here's the current setup, and I haven't marked in the possible small IHS forming due to space constraints on the chart:
What impact will this have on equity markets? Well the experience in QE1 and QE2 isn't encouraging for bears here. As USD fell equity markets in the US rallied hard, and markets in the Eurozone and the UK rallied hard too. There's a good argument that massive QE anywhere in the western world has a positive effect on equity markets, but that equity markets in the US should be a better play while the US Dollar rises. The effect on commodity prices should be more marked, though oil might well hold up due to well founded concerns about war in the Middle East.
On that last subject I read Netanyahu's speech to AIPAC a few days ago and it was difficult to argue with the logic of what he said in that speech. What I took away from reading it is that war between Israel and Iran is a lot more likely than most people are thinking, and that traders should bear that in mind. You can see the speech here and draw your own conclusions, but if that's right, then any moves down on oil may be short-lived as pre-war tensions rise.
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