The Bollinger Bands in these charts represent two standard deviations of statistical probability. Should break-out today occur and prices close below the lower band, the new Dollar has an 80+% statistical probability of continuing in this direction and forming a new downtrend. Thus, the likelihood of a new Dollar downtrend is relatively high. This in turn is likely to send commodity prices much higher! As you can see on this chart, the four-hour chart on the right shows that this new Dollar downtrend is already well under way. This lower Bollinger Band (on the daily chart) represents a significant support level, but a close below this level has a high statistical probability of continuation. Thus, the next few days will be critical to the emergence or repudiation of this new downtrend. Since the day hasn't closed yet, it is still conceivable that the price of the Dollar Index could rebound before the day is finished. We will know over the course of the next few hours.
Despite this, note that on the same chart, in the red-circled area, we saw a similar breakout in early November (Nov. 4th), which then reversed, with prices rebounding back within the Bollinger Bands. If prices rebound from a break-out back inside the Bollinger Bands, then there is also a strong statistical probability that prices will then have enough momentum to touch the opposite band, as they did in this case, touching the opposite band just eight (trading) days later on November 16th.
If this new Dollar destruction downtrend is confirmed, the weekly chart (not shown) shows the next area of support at around 76.100.
One more notable thought: Today is the last day of the month, quarter, and year! Window-dressing by large funds may also be at work here! Large fund managers may be seeking to lock in profits and/or wash out their losing trades so that they can start the new year fresh. It is wise to keep this fundamental dynamic in mind as well.
May 2010 be a happy and profitable new year!
