Last week I alerted members that the dollar was approaching potentially strong support at 98.65 – 99.  This morning, it reached the upper end of that range.We’ll take a quick look at the drop, and what to expect in the coming days.

continued for members…DX reached the yellow TL and the .618 Fib lines — arguably the most important downside targets.  The rising purple TL was probably tagged, though it’s a little hard to say for sure with a line that’s this old and subject to placement errors. The one mystery is the SMA200, currently at 98.447.  Note that DX reached it back on Nov 9 (aftermath of election day) and got a very sharp bounce.  I wouldn’t be surprised to see another such sharp plunge and recovery sometime in the next few days.

Though, the bulls would probably rather it wait until the SMA200 has reached 98.901 so there aren’t any Fib-related mishaps.  If so, that might not be for another few weeks. We’ve been looking for USDJPY to dip to tag its own SMA200 — currently at 108.229.   A quick dip in DX would help immensely.  Also, we’ve been waiting for CL to complete a move to 45.47 (currently 47.64.)  If USDJPY beat CL to the punch and got a sharp bounce off its SMA200, then CL’s dip would be less frightening to the algos and real traders alike.

So, we’ll look for a possible one-two punch of that nature either tonight or Tuesday night — as CL and DX/USDJPY both plunging at the same time would do a number on stocks.   If CL’s plunge is too horrible for stocks to bear, however, no amount of DX rallying would offset it.  In that case, consider today’s 98.858 to be the bottom.

GLTA.