There has been some analysis in the mainstream press recently suggesting that should the dollar fail to hold 100, it could retreat perhaps to 97 – 98 before finding support. While this is true from a short-term basis, as there is a rising (blue) trend line visible on the chart from the May lows, we believe this analysis is largely missing the big picture.
A failure for the dollar to hold its November breakout would constitute an extremely bearish “false breakout” from a 2-year consolidation. The result should be a severe plunge to the downside lasting for several months as an initial wave. The blue trend line shown above would not provide more than a temporary bounce in such a situation. False breakouts following new multi-year highs represent major reversal patterns, quite in contrast to false breakouts from a multi-year bottoms.
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