The definitive U.S. Dollar Rally Thread

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  • Fri, Feb 05, 2010 - 04:09pm

    #21
    Peak Prosperity Admin

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    Re: Dollar breaks 80!

[quote=JAG]

With the dollar hitting 80, has anyone seen any projected upside targets for the USD?

In an interview last month, Mish was looking for the dollar to hit 81.5 and then pullback, but to eventually make its way to 90+. Personally, I think the bull market in the dollar that started in 08 is still intact, but time will tell of course.

Bernanke must be loving this.

[/quote]

I should know Prechter’s perspective off the top of my tongue since I’ve been subscribing for almost a year now, but I don’t.  I know for sure his low-end target for the dollar is 90 and I think he predicted a high-end target of 110, but the 110 I am not sure of.

 

 

  • Fri, Feb 05, 2010 - 09:57pm

    #22
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    Re: The definitive U.S. Dollar Rally Thread

This rescued the market. http://www.cnbc.com/id/35261213

 Art Cashin: It’s All About the Dollar http://www.cnbc.com/id/35256043

  • Thu, Feb 18, 2010 - 03:04am

    #23
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    Resurrecting this thread…

I haven’t seen any action in this thread for a while so I thought I’d try to resurrect it.

Looks like we’re coming up on a decisive moment. Could be a triple-top (signaling likely further downslide) or a breakout past the previous resistance level at 80.75 (on the March contract). Anyone seen any good analysis or articles on this? As CM has said in another thread, just about every asset class has been trading off of the DX signal as traders wrestle with whether to unwind or expand their dollar carry trades…

U.S. Dollar Index (March Contract)

Seems to me that if the change of direction in the DX “holds” here at 80.75 or lower, the PMs should go through the roof. They are already trading well above their levels at the time the DX last traded above 80.60. But if we see a decisive breakout above 80.75, I think the metals are toast. Morpheus?

Erik

  • Thu, Feb 18, 2010 - 04:10am

    #24
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    Re: The definitive U.S. Dollar Rally Thread

Is anyone thinking that the short squeeze in the Euro on Tuesday was behind the recent strength in PM and stock markets?

I thought I read something regarding that but I can’t seem to find it again. 

(Sorry I’m not Morpheus, Erik)

  • Thu, Feb 18, 2010 - 04:29am

    #25
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    Re: The definitive U.S. Dollar Rally Thread

[quote=JAG]

(Sorry I’m not Morpheus, Erik)

[/quote]

I was hoping to hear from you too, Jeff. Just mentioned ‘Morph because he seems to follow the gold and silver markets even more closely than I do.

Silver does appear to be noticably out-performing gold in the last several days, which may confirm Ted Butler’s thesis about JPMorgan’s short manipulation coming to an end. But I’m still convinced that if the DX rally takes off or if equities start to crash (rather than just correct) on their own, it’s going to mean a train wreck for PMs. Of course logic would seem to suggest that the opposite should be true, but so far the market hasn’t figured out that the so-called “flight to safety” trade into U.S. treasuries and away from PMs is more of a flight to stupidity than a flight to safety.

Erik

 

  • Sun, Feb 21, 2010 - 01:36pm

    #26
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    TheLatest from Albert Edwards – Euro to devalue 25%?

Here’s the latest from my favorite pessemist, Albert Edwards.  He calls for the Euro to devalue 25% vs the Dollar, paints a forecast for long-term volatility, and presents a pretty strong argument for the current “up”-cycle having reached its peak:

http://www.zerohedge.com/article/timing-exit-competitve-devaluation-looms-euro-25-overvalued-more-thoughts-albert-edwards

Here’s an excerpt:

 

In a post-bubble Ice Age world, equity investors have to watch the cycle far more closely than before. One of the key lessons from Japan was that prior to their bubble bursting, equity valuations were dominated by movements in bond yields and hence there was only a very loose relationship between equities and the economic cycle.

 

But after the bubble burst and as The Ice Age unfolded, the close positive correlation between bond and equity yields broke down as equities suffered secular de-rating – driven by 1) the unwinding of unrealistic market-wide long-term earnings expectations in a low inflation world, and 2) a rise in the cyclical risk premium, as Japan?s own version of The Great Moderation gave way to highly volatile economic cycles.

 

Japan enjoyed some impressive 50% equity market rallies during their lost decade, driven by strong policy induced cyclical recovery. The secret was to exit as the cycle started to top out as this preceded the equity market dropping to new lows.

 

Early last year the safe re-entry back into risk assets was signalled by a clear upturn in leading indicators. So too now should investors be concerned that the leading indicators are topping out. The recovery in the leading indicator for China seemed to precede that of the composite for the OECD and similarly China has now topped out ahead of the OECD composite (see chart below). Indeed, other emerging economies such as India (below) and Brazil are also seeing clear warning flags of cyclical caution.

 

So are leading indicators to the leading indicators the key catalyst to follow in this market?

In a post-bubble world it is far more important for equity investors to follow the cyclical ebb and flow of the economic cycle. We know from the Japanese experience that the post-bubble equity market synchronizes extremely closely with the economic cycle. But, while in a post bubble world massive cyclical gains can still be made in a structural bear market, how does an investor know when it is time to get out of equities?

Certainly my former colleague, James Montier [whose latest, quite pessimistic piece we posted previously], derided the notion of investing on the basis of forecasts as they inevitably proved so inaccurate. It would not be too unfair to say that market and economic forecasters tend to hug the consensus and typically lag events. That is especially true at cyclical turning points. That is why it is useful to monitor proprietary leading indicators. These are especially useful in predicting economic turning points and allow the investor the opportunity to pile into or withdraw from cyclical risk assets.

  • Thu, May 13, 2010 - 01:04pm

    #27
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    Is It Time To Start Selling the USD?

With all this drama about the Euro, and the record number of shorts being piled up against it, maybe its time to begin focusing our attention away from the Euro. It does seem like the dollar has more room to run, so this is likely premature, but this would be an opportune time to formulate a strategy for the inevitable shift in perspective.

With its recent rise, Gold has removed itself as a viable weakening-USD play IMO, but I suspect it will pullback in the doldrums of summer trade. Perhaps, if the timing of the pull-back is opportune, an increased PM allocation can be an effective component of this strategy.

Besides PMs and the obvious ETF plays, does anybody have any creative ideas for playing future USD weakness?

Thanks in advanced.

  • Thu, May 13, 2010 - 01:30pm

    #28
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    Re: Is It Time To Start Selling the USD?

[quote=JAG]

With all this drama about the Euro, and the record number of shorts being piled up against it, maybe its time to begin focusing our attention away from the Euro. It does seem like the dollar has more room to run, so this is likely premature, but this would be an opportune time to formulate a strategy for the inevitable shift in perspective.

With its recent rise, Gold has removed itself as a viable weakening-USD play IMO, but I suspect it will pullback in the doldrums of summer trade. Perhaps, if the timing of the pull-back is opportune, an increased PM allocation can be an effective component of this strategy.

Besides PMs and the obvious ETF plays, does anybody have any creative ideas for playing future USD weakness?

Thanks in advanced.

[/quote]

Jeff. I’ll probably liquidate more holdings pending the summer doldrums and then probably keep some cash and put a some into gold and silver shorts. But, if anyone else has “creative” ideas I’d like to hear about it too. 

What are you doing for the seasonal slump? Do you think it’s coming? If not, why? 

  • Thu, May 13, 2010 - 01:33pm

    #29
    Peak Prosperity Admin

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    Re: The definitive U.S. Dollar Rally Thread

Jeff,

This is a subject I’ve considered long and hard. My conclusion is that it’s too dicey to play. The USD should collapse. But its the best looking horse in the stable, and will continue to benefit from the “safety trade”, even if the safety perception is misplaced.

The mess in Europe is far from over. I thought they market would figure out this week that the “bailout” achieves exactly nothing, but so far it’s pulling the wool over investors’ eyes. When the reality of Europe is really understood, I expect massive flight capital into the USD and gold.

Gold is the consistent play here. I hate to have all my eggs in one basket, but it’s the one play that makes sense. Selling the USD and even moreso shorting long-dated U.S. treasuries will be the killer trade. At some point. And until then, the shorts will get killed with all the flight capital. Gold has room to appreciate and hold its new value. Shorting the DX is shooting at a moving target, IMHO.

If we see a really absurd DX appreciation – say to 95+., or a long-bond yield collapse to 2% again (futures at 140+), I’d go short there. But shy of that, I think the long gold play is the safest bet.

Erik

 

  • Thu, May 13, 2010 - 01:40pm

    #30
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    Re: The definitive U.S. Dollar Rally Thread

[quote=Erik T.]

The USD should collapse. But its the best looking horse in the stable, and will continue to benefit from the “safety trade”, even if the safety perception is misplaced.

[/quote]Best looking horse in the glue factory.

Why not just make your money off of PM’s and save money by having essentials on hand?

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