The last 14 months has seen the US Dollar Index fall nearly 15 percent (top to bottom). Sentiment toward the dollar has turned bearish as well.
From a contrarian standpoint, the US Dollar Index is nearing an oversold bounce. But could it lead to a stronger rally than expected? Over the past two weeks, the Dollar has rallied over 2 percent.
And from a technical view, the Dollar is attempting to poke its head above a bullish falling wedge pattern. This all occurring after hitting a cluster of price support. Note that US Dollar strength would not bode well for precious metals. More on that below.
US Dollar Index – Bullish Setup?
If the Dollar succeeds in its breakout attempt, it could spell trouble for precious metals. Already struggling to make new highs with the Dollar at 3-year lows, a surge in the Dollar certainly wouldn’t help.
In the following chart, we look at the ratio of silver to gold prices, which is testing a 20-year support line!
