The definitive U.S. Dollar Rally Thread

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The definitive U.S. Dollar Rally Thread

We seem to have a half-dozen or so threads on the site focusing on the price of gold, but relatively little discussion about the U.S. dollar rally presently underway, which IMHO is the primary catalyst for the ongoing gold correction. So this thread is for discussion of the current rally in the USD, posting links to articles about it, opinions and insights on how long it might last, etc.

To get the conversation rolling, I'll pose a few questions that have been on my mind:

  1. Several notables (most prominently Jim Rogers and Nouriel Roubini) started warning of an impending USD rally just before it began. So hooray for their market-reading prowess. But what I don't understand is how they called this one. Jim Rogers' explanation was the basic contrarian view that when any trade gets too crowded, it brings on a correction. Ok, fair enough, Jim. But the long gold/short DX rally has been overcrowded for months and months. Then one day out of the blue, Jim Rogers says "hey this feels crowded" and suddenly a rally ensues. What gave Jim the clue that now was the time to go long the DX? By his own admissions, he feels he is a terrible market timer, but he decided to ignore his usual policy of not trying to time markets, and went long the DX just before the rally began. What told him the obvious contrarian argument was suddenly timely? Same issue for Roubini. His comments began a little earlier than Rogers, but all he said is when something goes down in a straight line it's bound to correct. Why did he just recently start emphasizing this so much? In short, how did they know this rally was just around the corner?
  2. While there has been lots of discussion about why the USD should rally now, I haven't heard a peep in terms of speculation about how long the correction/rally should be expected to last, in terms of either price or time duration. Jim Puplava suggested 6 weeks or so but his comments were very vague. Anyone seen any good insight on a retracement target or calendar timetable for this rally?
  3. The last time the USD rallied, we later learned from CM that the underlying cause was almost certainly clandestine currency swaps with foreign central banks orchestrated by the Fed. I agree that the "overcrowded trade argument" makes sense, but I also wonder what other monkey business might be contributing to the sudden strength in the USD that began just before Bernanke's reappointment process got underway. I'd love to see links to any articles or insights on what Fed activity might be propping up the greenback, and how long it's likely to last.

Ok, CM.com'ers, what are you hearing/reading about the DX rally?

Erik

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Re: The definitive U.S. Dollar Rally Thread

p.s. I really can spell contrarian, folks. I have no idea why the spelling got changed or why the edit button is missing, preventing me from fixing it...

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Re: The definitive U.S. Dollar Rally Thread

"About the Dollar, it is still working higher on good volume so one could argue from a technical perspective that it has a ways to run to the upside yet but because this time of the year is so tricky on account of book squaring and year-end positioning, I am hesitant to be too dogmatic about its prospects. Money gets slung around in the pits this time of year in large quantities with seemingly no meaning at times. That can generate some pretty good volume but the number has to be taken with some skepticism merely because it is related to closing out of positions on both sides.

Fundamentally, there is no reason to buy the Dollar unless you really believe that the Fed is going to raise interest rates (something which I personally do not) because you are faced with the hard reality of an ever increasing supply of the same versus reduced demand ( I noticed yesterday that the New York Fed custodial accounts is worrisomely closing in on the $THREE TRILLION mark). That bodes for lower prices for the greenback as economic law tends to be axiomatic about that sort of thing. Technically it looks much better on the weekly chart with both the 10 week and 20 week moving averages turning upwards and price above both. I will have to see a weekly close above the downtrending 40 week moving average near the 79.50 level before I would become friendly towards it for the short term. Long term it is going lower, much lower."

The words of Dan Norcini on Jim Sinclair's website called "MineSet" on 12/18/2009

 

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Re: The definitive U.S. Dollar Rally Thread

Well let me preface this comment with what everyone who has been on this site already knows, and that is: I really can't spell contrarian, folks.

Eirc, Super read, provokes thought. I'm not even going to try to guess this one. To me the economy reminds me of my boat motor when I was a 13 year old kid who was so excited about fishing that I forgot to add oil to the gas. I knew as it was seizing that it was running on it's last stroke.

If I had to guess I'd guess that gold is a contributing factor, but my gut nags me that something else is at play. I don't know if that is CB's or something in Greece, Dubai, and Ireland. If my hunch is correct this will be the last dead cat bounce before we shovel dirt on Uncle Buck's grave.

My 2 cents.

Take care

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Re: The definitive U.S. Dollar Rally Thread

Hey Erik,

I've been bullish on the dollar for several months now from strictly a sentiment perspective. It does seem like the reversal took a long time to unfold, so long in fact that it seems like many people, too many people in fact, were calling for a reversal.

I have a lot of respect for Jim Rogers, but I don't buy his "I'm a terrible market timer" proclamation on CNBC, etc. In fact I believe that he thinks he is a great market timer, otherwise he would have no need to preface his opinions with this disclaimer. Nobody becomes a world class trader without great  market timing skills.

If the dollar breaks resistance at 80 and 81, then we would have technical confirmation that the dollar rally that began last year is still in play. Which means it will most likely reach the 90s on this move. I was figuring that the dollar would put in a double bottom at 71 and just when everybody was in full panic mode about a currency crisis it, the market makers would profit from a rocket rally in the dollar. I still think this is likely, despite the recent relative strength in the USD.

I have to say that I disagree with Dr. M's currency swap hypothesis for last year's dollar rally. There are too many credible accounts showing that the currency swaps were functioning to counteract the massive rally in the dollar, not create it. But I must admit that Dr. M knows a great deal more about Central Bank "going-ons" than I will ever know, and I can really appreciate his efforts to keep his mind open to all possibilities and to take no assumption for granted.

It is interesting to note that last year, the dollar rallied for over a month before the markets started their significant declines. Perhaps we will see that post-Christmas/New Years Crash after all.

If your interested in reading some bullish dollar viewpoints, check out the The Definitive Inflation vs Deflation Debate and What to do About It Thread . Farmer Brown and myself posted several articles relating to this in the last few months of this thread's "lifetime".

So my current bottomline is that I remain unconvinced by this recent rally in the dollar and I still think we have the potential for a "double bottom panic" before the real rally in the dollar occurs.

(PS: I would have started this thread a long time ago, but I figured it would either wither away or be consigned to the "CT" bin....LOL.)

Thanks for starting it.

 

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Re: The definitive U.S. Dollar Rally Thread

Jimmy Rogers has been talking about a dollar rally for most of this year.  When you make the same call for several months,  you look good when it finally happens.  He admits that he is an awful short term trader.  He is still long term bearish on the dollar and bullish on China and commodities.   Roubini was warning of a dollar crash in September but has now switched to the "carry trade unwind"  side.   Roubini has a track record that is pretty bad..   http://wallstcheatsheet.com/breaking-news/economy/a-chart-of-roubinis-horrible-trackrecord-in-2009/?p=3513/

Bob Prechter is another dollar bull.  But he has a 25 year track record that stinks.  He told people to sell gold and stocks back in August when the dollar was 78 and gold and the SPX were both around 960.   The dollar is back to 78 but stocks and commodities are much higher.  Perhaps that's another thread topic.

The dollar has been boosted for a couple of weeks by short covering aided  by weakening euros, yen and pounds.  There has been an end of year run to liquidity.  It has been a good year for stocks and profit taking has increased demand for cash.  Some of the big bond players are selling treasuries and going to cash.  Bill Gross at PIMCO is one example of this.  http://www.zerohedge.com/article/pimco-sells-265-billion-treasuries-and-mbs-october-goes-cash

I think it's amusing that two weeks of bounce following months of falling has generated so much press.  There is no panic like the one last year when deleveraging created monster swings in every asset class.  Let's see what happens in the new year. 

The dollar bears need to consider what will happen in 2010 if/when the bond bubble deflates,  because that creates demand for dollars.   Of course the next question is what will people do with that cash?  I'm betting they buy things that have intrinsic value like oil,  sugar, coffee, gold etc.  But if they hold the cash, we could get a liquidity squeeze.

So in 2010, will we get a big liquidity squeeze that sends the dollar higher for months?   Will the fed continue to work with treasury to keep bond auctions covered?  As more  problems appear,  like this one  http://tinyurl.com/ykawezj   will the fed be forced to monetize despite their claims to the contrary?  And what will China do? 

 

 

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Re: The definitive U.S. Dollar Rally Thread

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Re: The definitive U.S. Dollar Rally Thread
idoctor wrote:

Thank you iDoctor! I think Schiff has it nailed. Soverign default is going to be a living breathing hell. I'm off to shovel my 200 (what the bleep was I thinking when I built) foot driveway and listen to FSN. Listening to how the idoits sc*w things up always gets my blood pressure up, which will keep me warm in this 22 degree 26" blizzard. 

Take care

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Re: Thread Editing and Spellchecking
ErikTownsend wrote:

p.s. I really can spell contrarian, folks. I have no idea why the spelling got changed or why the edit button is missing, preventing me from fixing it...

Fixed it for you.  The first post of a thread doesn't have edit capabilities to ensure we avoid losing context of a post.  All comments (responses to thread posts) are editable for one hour after they have been posted.  I certainly recommend to use the "preview" button when possible to review a new thread before saving it.

As an enrolled member, you also have the ability to change your "input format" (see below the comment) to "Filtered HTML - Enrolled Member".  This allows you to use the spellchecker.  I used this to quickly find where you had typed "contrarion", plus also fix two other spelling mistakes.   Wink

Ron

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The Dollar Is Like Rocky
ErikTownsend wrote:

While there has been lots of discussion about why the USD should rally now, I haven't heard a peep in terms of speculation about how long the correction/rally should be expected to last, in terms of either price or time duration. Jim Puplava suggested 6 weeks or so but his comments were very vague. Anyone seen any good insight on a retracement target or calendar timetable for this rally?

Ok, CM.com'ers, what are you hearing/reading about the DX rally?

Erik

Eric, thanks for posting this thread.

Max Keiser mentioned this on his 12/16/09 radio broadcast (start listening at 24:06). He seems to think the rally has legs and will last for up to six months, but I don't know how much stock I'd put on this. I'd be surprised if he had any money riding on this rally and you know what they say: talk is cheap.

Two things he mentions are . . .

1. Faith in the dollar is still very strong in the minds of millions and millions of ordinary people around the world.

2. Trends in currency markets tend to last longer than in other markets.

I don't have enough experience or knowledge to comment on number 2, but I'd like to really draw some attention to number 1. Apart from a small number of very financially savvy people, most of the world has a lot of faith in the USA and the dollar. I live in Poland and you can't believe the kind of fantasies some of these people have about the US. Back when Poland was under communist control the US was like Zion to the Poles. Getting a relative in to the US to get a job, any job, so he could start sending dollars back to Poland made a huge difference to the average Polish family. Dollars being sent back home in the mail were like mana from heaven. Under communism there were special stores that sold products you couldn't buy anywhere else in Poland and these stores only accepted dollars (my private students have told me stories about this).

I think everyone on this site knows that the situation in the US has changed since then, but the average foreigner still looks toward the US as the promised land. I'd call this emotional equity, and the US still has a lot in the minds of the average Pole, Russian, Ukrainian, Dutchman etc. I don't know what the Asians are thinking, but my experience in Europe is that the Europeans believe in the US more than they believe in themselves (with the possible exception of some of the British and some of the French). 

You guys need to get outside the states from time to time to get some perspective. It's not like the US is rotting out at the bottom and the rest of the world is thriving and taking off like a rocket. These other countries have tons of problems of their own, and in a world where currencies are backed by nothing but sentiment, positive sentiment and nostalgia towards a currency must have some value.

The world's not ready for the dollar to drop like a brick.

 

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Re: The definitive U.S. Dollar Rally Thread

Here is a long term dollar chart  from Jesse's Americain Cafe  http://tinyurl.com/yg9uqp9    What rally?

This short term chart also from Jesse, shows fibonacci retracement points and a significant resistance line at 79.5.  The euro would have to break below 1.41 for this target to be reached.    Again,  what rally?   This is a two week short covering, profit taking, year ending bounce that has failed to hold above 78, much less get to 80 or higher.  

Inflation is always and everywhere a monetary phenomenon - Milton Friedman  

The MZM money supply graph for the last 5 years - http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=MZM&s[1][range]=5yrs

The price of gold is up nearly 300% in that same 5 year time frame http://www.kitco.com/charts/popup/au1825nyb_.html

Bloomberg reports this morning that Bernanke has won the fight against deflation and offers as evidence the TIPS bond prices. 

What price does the dollar index have to hit for the deflationistas to give up?  What price gold? oil?    The US is running deficits in excess of 10% of GDP.   No matter how much balance sheet repair is done by individuals,  the government is going to spend for us.   

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Re: The definitive U.S. Dollar Rally Thread
Gigem77 wrote:

Here is a long term dollar chart  from Jesse's Americain Cafe  http://tinyurl.com/yg9uqp9    What rally?

This short term chart also from Jesse, shows fibonacci retracement points and a significant resistance line at 79.5.  The euro would have to break below 1.41 for this target to be reached.    Again,  what rally?   This is a two week short covering, profit taking, year ending bounce that has failed to hold above 78, much less get to 80 or higher.  

Inflation is always and everywhere a monetary phenomenon - Milton Friedman  

The MZM money supply graph for the last 5 years - http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=MZM&s[1][range]=5yrs

The price of gold is up nearly 300% in that same 5 year time frame http://www.kitco.com/charts/popup/au1825nyb_.html

Bloomberg reports this morning that Bernanke has won the fight against deflation and offers as evidence the TIPS bond prices. 

What price does the dollar index have to hit for the deflationistas to give up?  What price gold? oil?    The US is running deficits in excess of 10% of GDP.   No matter how much balance sheet repair is done by individuals,  the government is going to spend for us.   

Gigem,

LOL, you really expect a 2 week move to look significant on a 25+ year chart? 

When oil was more than double its current price (last year), it paid handsomely to be a deflationist. So the lower the dollar goes, and the higher gold goes, the more profit potential for the deflation trade. Inflation/Deflation is a trade, not macroeconomic gospel.

I think its obvious that this market doesn't care whether your an inflationist or deflationist, its an equal opportunity rapist. 

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Dollar and Equities Divergence

This chart was taken from www.slopeofhope.com .  The black line represents the Euro (roughly inverse of the dollar), and the blue line represents equities. 

You can see a pretty strong correlation between the two until just recently, when the dollar has gotten stronger and equities have been unaffected, so far. What does this divergence mean? Either equities are in a holding pattern for some calendar year-end window dressing, or the dollar is approaching a plunge. I think its the latter. A dollar double bottom in the 71 area would create the most confusion on both sides of the trade.

What do you think?

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Re: The definitive U.S. Dollar Rally Thread

Good chart Jeff,

The dollar is very strong, bonds are selling off, and gold is selling off.  At this point, the financial markets are not concerned with the long term prospects for the US dollar - rather the markets are acting as if cash is king and the most valuable asset.  US equities are holding - but other markets have slipped over the last couple weeks (china, brazil).  Couple underlying themes right now are certainly the Euro risk, and that M3 is contracting rapidly.  This might cause a move from risk assets as people need to raise cash simply for transactional purposes.  The shortage/shrinking of credit leads to a higher demand for dollars.  Deflation might be gaining the upper hand at the moment.

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Dollar Is Going Ballistic

The stock market is severely oversold but still can't rally.

The VIX has a bullish flag.

And the dollar rally remains strong.

"I love the smell of de-leveraging in the morning"

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Re: The definitive U.S. Dollar Rally Thread

This week the fed indicated that dollar swaps with other central banks will end as planned in February.  This is extremely bullish for the dollar, since other central banks will have to buy dollars off the market to transact interbank business.  Of course, the fed does not always do what it says......

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Re: The definitive U.S. Dollar Rally Thread
docmims wrote:

This week the fed indicated that dollar swaps with other central banks will end as planned in February.  This is extremely bullish for the dollar, since other central banks will have to buy dollars off the market to transact interbank business.  Of course, the fed does not always do what it says......

Doc,

I saw that as well, and it was the topic of a Weiss newsletter a friend forwarded me (I don't subscribe).  There are a number of potential financial toilet bowls beginning to swirl (The PIIGS and China i.m.o., plus of course Du-bye-bye).  ALl of this is extremely bullish for Uncle Buck.  

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Dollar breaks 80!

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.

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Re: The definitive U.S. Dollar Rally Thread

If you want to see the Elliott Wave perspective it's free week on their site. They predicted this strengthening dollar a while back. I don't recall on how long they think it will go, but they are feeling very very bearish on stocks right now.

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Re: The definitive U.S. Dollar Rally Thread
rickets wrote:

cause a move from risk assets as people need to raise cash simply for transactional purposes.  

+1 to those words.

Piling into US$’s and Treasuries, quite ironic

The panic for CDS sovereign protection is continuing this morning and investors take solace in the US$ and US Treasuries. Quite ironic of course since statistically the finances of the US government if local and state governments are included aren’t much different than Greece but investors have their late ‘08, early ‘09 playbook out where everything is sold and money is parked in US dollars. If sovereign debt concerns spiral, it will be gold that will be the last man standing in a fiat currency world and while I understand the short term psychology of investors to sell it along with all other commodities, the reason for its ownership only rises in the current environment.

IM never so HO running a playbook from '08-'09 won't end well.

 

 

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Re: Dollar breaks 80!
JAG wrote:

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.

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.

 

 

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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

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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

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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)

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Re: The definitive U.S. Dollar Rally Thread
JAG wrote:

(Sorry I'm not Morpheus, Erik)

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

 

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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.

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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.

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Re: Is It Time To Start Selling the USD?
JAG wrote:

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.

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? 

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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

 

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Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: The definitive U.S. Dollar Rally Thread
Erik T. wrote:

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.

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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Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: The definitive U.S. Dollar Rally Thread

JAG,

IMO your thinking is right on.  Trouble is, in the words of Yoggie Berra, predictions are so hard - especially when they are about the future. 

Kidding aside, the dollar is obviously due for a retracement.  Question is, will it retrace before a rise to new highs, or retrace for good?  I think it will make a partial retrace towards its lows, and then rally past whatever the current peak ends up being.  That's just based on commonly accepted wave theory.  I will not utter the P word here (Prechter), because Elliot Wave chartists besides him agree.

I am thinking of liquidating some of my UUP shares, maybe half, today.  Maybe I'll sell all of them.  It's a tough call. I can always re-enter after it corrects, and try to ride the next wave up.  Trouble is, with Europe running out of gold and silver, the dollar may have much more to benefit from this current psychological cycle.  What I mean is, if you cannot get your hands on PMs, and your European, you most likely next option is to buy Uncle Buck.     

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