USD 02 (Oct 09 - Sep 10)

[winston]

Why the Dollar Will Soar in 2010 by Alexander Green

We all know why the dollar is in the cellar right now. We also know why it's expected to continue right through to the basement floor:

~ Massive budget and trade deficits.

~ Ultra-low interest rates. (Zero on the short end.)

~ $59 trillion in unfunded liabilities for Social Security, Medicare and Medicaid.

~ Bernanke conjuring extra trillions out of thin air to buy Treasuries and mortgage-back securities and patch various holes in the U.S. economy.

There is no reason to believe any of these problems will vanish in the months ahead. Yet the dollar will soar in 2010. Here's why...

Two Reasons for a Dollar Rebound

There are two main forces that could drive the dollar higher:

* All the problems mentioned above are already well recognized and priced into the greenback.

* Dollar psychology is overwhelmingly bearish. Just as 10 years ago, investors couldn't imagine Internet stocks doing anything but soaring higher.

Five years ago, they couldn't imagine real estate doing anything but barreling down the same one-way street. Record lows for the dollar are coinciding with enormous confidence that the dollar has nowhere to go but down.

When extreme valuations are accompanied by unbridled optimism or abject pessimism, it virtually always marks a turning point - and an opportunity. This is no exception.

Commentators seem to forget that all currency values are contingent. You can't just look at fundamentals in the United States. You have to look at them abroad, too.

And there isn't much out there right now that's terribly positive...

Source: Investment U

[winston]

( Continue from above .. )

And there isn't much out there right now that's terribly positive...

America's Fellow Heavyweights Have Problems, Too

Take Europe, for example...

~ Eurozone: In the third quarter, the 16-nation Eurozone grew at a 1.5% annual rate. The U.S economy, by comparison, grew at 3.5%. European consumers and most business sectors are still feeling the pain from the deepest recession since the 1930s.

The continent is likely to be the weakest region for global expansion next year, according to Julian Callow, Chief European Economist at Barclays Capital in London.

~ United Kingdom: This is no bastion of strength, either. Europe's biggest economy outside the Eurozone is still in recession, due to overly indebted British households and tight credit. British GDP contracted at an annualized 1.6% in the third quarter.

~ Japan: The world's second-largest economy has its own problems, too. At 172% of GDP, Japan's government debt is by far the largest among rich nations. What's more, it's expected to reach 200% next year - and hit 300% within a decade. Rising social security costs and the weak economy are the primary culprits.

The new government there is trying to prevent a double-dip recession by spending even more. But with government debt soaring to records, talk of new stimulus measures is already pushing up long-term rates and threatening to curtail the impact of fresh spending.

Bet on the Dollar in 2010

Recognize that Europe and Japan are hardly experiencing heady economic growth and great fiscal probity. Most are bogged down economically and running fiscal deficits as bad as ours.

And personally, when the whole world is in this big a mess, I'll take the greenback over the euro, the pound, or the yen. My bet is in 2010, so will most world currency investors.

Virtually no one is expecting it, but the dollar is likely to climb 20% against the euro and the pound next year and 15% against the yen.

Hedging is fine, of course. But if you have too much exposure to foreign-currency denominated bonds, CDs, or bank accounts, rein it in.

Source: Investments U

[winston]

TOL:-

I'm a bit concerned that there's now a lot of "experts", who thinks that the USD will go up in the short term due to shortcovering.

You can see it in the Newsletters as well as hear it on CNBC.

So is it still crowded on the short side or is the long side getting crowded now?

[kennynah]

not crowded since it is not in the similar light as if /DX was at its peak and everyone is still bullish... the view of /DX turning up from its low is not even more than 3 weeks old... CNBC is reporting on what is a more solidified view of that /DX could continue to move up...after having broken resistance some 1+ week ago

[winston]

A BIG trend to keep your eye on By Tom Dyson in Penny Trends:

So what are the big trends you need to know about this week?

The dollar is one. The U.S. dollar is probably the most important financial instrument in the world. It's the cornerstone of the entire global financial system. When the dollar moves, you get major reactions in other markets.

Here's a chart of the U.S. Dollar Index, an index of the dollar's value measured against a basket of the major currencies like the euro, the yen, and the pound.

As you can see, the dollar has been sliding lower for most of the year. By the end of November, the dollar had fallen more than 17% from its March high. This is one of the seven worst declines in the dollar of the last two decades.

Over the past three weeks, the dollar has rallied. It's the strongest bounce we've had in six months. Notice the Relative Strength Index (RSI) reading at the bottom of the chart. It's been rising, even while the dollar has been falling. This is a bullish development. It suggests the dollar is healthy on the inside, and a major turning point is in the works...

[winston]

Remember what happened to oil when it was at US$150 ?

Goldman Repeats Tactical Weaker-Dollar Bet as Currency Advances
By Justin Carrigan

Dec. 21 (Bloomberg) -- Investors should seek opportunities to bet that the dollar will decline against the euro and the pound, Goldman Sachs Group Inc. said.

Goldman’s recommendation came even after trades the bank had suggested went the wrong way, for a “potential loss” of 1.8 percent on dollar-euro and 1.1 percent on dollar-pound.

“Timing was clearly not optimal, and we were too early in fading the recent improvements in U.S. data and the impact of Greek budget tensions,” analysts at the bank wrote in a note received today. The U.S. “balance of payments situation remains very dollar negative. We would therefore continue to look for opportunities to position tactically for dollar weakness.”

http://www.bloomberg.com/apps/news?pid= ... m1sZsX4Mfc

[winston]

Am taking note of where the 50% retracement is ...

GETTING TECHNICALA Refreshed Greenback By MICHAEL KAHN

After being mired in a deep bear market, the dollar has made a nice recovery. The charts suggest that there may be more to come.

WITHOUT ANY FANCY INDICATORS, it was easy to tell in recent months that the U.S. dollar was one of the most universally unloved financial instruments of all time.

From fundamental reasons citing uncontrolled spending to technicals such as a relentless declining trend, many thought the greenback was the dodo bird of world currencies. Extinction, here we come.

And just when everyone was looking the other way, the floodgates of buying opened on December 4 and the dollar soared against all other major currencies and gold, too. Although now at technical resistance, the US dollar index looks to have a more room to rally.

http://online.barrons.com/article/SB126 ... 99837.html

[winston]

Dollar Gains on Speculation U.S. Companies Bringing Back Funds By Ron Harui

Dec. 28 (Bloomberg) -- The dollar rose for the first time in four days against the yen and euro on speculation U.S. companies are bringing back earnings on overseas assets before the year ends.

The dollar also gained on prospects U.S. reports tomorrow will show the world’s largest economy is recovering, backing the case for the Federal Reserve to withdraw emergency stimulus measures. The yen fell against all of its 16 major counterparts as Asian stocks climbed after a government report said Japan’s manufacturers raised output at the fastest pace in six months in November, damping demand for the currency as a haven.

“There seems to be last-minute repatriation by U.S. firms before year-end,” said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA. “This is helping to boost the dollar.”

http://www.bloomberg.com/apps/news?pid= ... gOoAsxnWvo

[winston]

Against Conventional "Wisdom," Expect This Currency to Rally in 2010
By Alexander Green

Nevertheless, history shows that investment opportunities are greatest when extreme valuations are combined with extreme sentiment. When euphoria greets high valuations and there's abject pessimism over low valuations.

This doesn't occur every day, of course. Under ordinary circumstances, most assets are neither an immediate sell nor a table-pounding buy.

Yet three weeks ago, I made the case that based on fundamentals and sentiment, the U.S. dollar is oversold and is likely to soar in 2010

. The greenback hasn't waited for the New Year, however. It put on an impressive rally in December.

Are we at the inflection point when the greenback makes a sustained move up against the world's major foreign currencies? I think so.

The structural imbalances in U.S. trade and fiscal policy are already reflected in the price of the dollar. Major European economies and Japan are hurting more than we are. And over the second half of the year, Ben Bernanke is likely to start mopping up the excess liquidity he created by raising short-term interest rates. That will only add fuel to the dollar's rally.

In short, expect a sea change in the way "the crowd" views the dollar this year. And adjust your portfolio accordingly


Source: Investment U

[BreakoutTrader]

Based on charts , USD is set to have a strong year this. With many currency charts showing a potential break down in their form ups.

Euro - set to weaken due to the fact that Greece, Italy and spain are having problems with their deficits.

GBP - UK GDP is set to be negative this year

CAD - with oil ranging at 70-80 , it would be rather difficult for CAD especially with cost price of close to 65 bucks per barrel for production.